House Hearing, 112TH Congress - Tapping America's Energy Potential Through Research and Development

TAPPING AMERICAS ENERGY POTENTIAL
THROUGH RESEARCH AND DEVELOPMENT

HEARING
BEFORE THE
SUBCOMMITTEE ON ENERGY AND

ENVIRONMENT
COMMITTEE ON SCIENCE, SPACE, AND

TECHNOLOGY
HOUSE OF REPRESENTATIVES
ONE HUNDRED TWELFTH CONGRESS
SECOND SESSION
FRIDAY, NOVEMBER 30, 2012
Serial No. 112108

Printed for the use of the Committee on Science, Space, and Technology
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COMMITTEE ON SCIENCE, SPACE, AND TECHNOLOGY

HON. RALPH M. HALL, Texas, Chair
F. JAMES SENSENBRENNER, JR.,
EDDIE BERNICE JOHNSON, Texas
Wisconsin
JERRY F. COSTELLO, Illinois
LAMAR S. SMITH, Texas
LYNN C. WOOLSEY, California
DANA ROHRABACHER, California
ZOE LOFGREN, California
ROSCOE G. BARTLETT, Maryland
BRAD MILLER, North Carolina
FRANK D. LUCAS, Oklahoma
DANIEL LIPINSKI, Illinois
JUDY BIGGERT, Illinois
DONNA F. EDWARDS, Maryland
N, New Mexico
W. TODD AKIN, Missouri
BEN R. LUJA
RANDY NEUGEBAUER, Texas
PAUL D. TONKO, New York
MICHAEL T. MCCAUL, Texas
JERRY MCNERNEY, California
TERRI A. SEWELL, Alabama
PAUL C. BROUN, Georgia
FREDERICA S. WILSON, Florida
SANDY ADAMS, Florida
HANSEN CLARKE, Michigan
BENJAMIN QUAYLE, Arizona
SUZANNE BONAMICI, Oregon
CHARLES J. CHUCK FLEISCHMANN,
VACANCY
Tennessee
VACANCY
E. SCOTT RIGELL, Virginia
VACANCY
STEVEN M. PALAZZO, Mississippi
MO BROOKS, Alabama
ANDY HARRIS, Maryland
RANDY HULTGREN, Illinois
CHIP CRAVAACK, Minnesota
LARRY BUCSHON, Indiana
DAN BENISHEK, Michigan
VACANCY
SUBCOMMITTEE
ON
ENERGY
AND
ENVIRONMENT
HON. ANDY HARRIS, Maryland, Chair

DANA ROHRABACHER, California
BRAD MILLER, North Carolina
ROSCOE G. BARTLETT, Maryland
LYNN C. WOOLSEY, California
N, New Mexico
FRANK D. LUCAS, Oklahoma
BEN R. LUJA
JUDY BIGGERT, Illinois
PAUL D. TONKO, New York
W. TODD AKIN, Missouri
ZOE LOFGREN, California
RANDY NEUGEBAUER, Texas
JERRY MCNERNEY, California
PAUL C. BROUN, Georgia
CHARLES J. CHUCK FLEISCHMANN,
Tennessee
EDDIE BERNICE JOHNSON, Texas
RALPH M. HALL, Texas
(II)
CONTENTS
Friday, November 30, 2012
Page
Witness List .............................................................................................................

Hearing Charter ......................................................................................................
2
3
Opening Statements
Statement by Representative Andy Harris, Chairman, Subcommittee on Energy and Environment, Committee on Science, Space, and Technology, U.S.
House of Representatives ....................................................................................
Written Statement ............................................................................................
Statement by Representative Ralph M. Hall, Chairman, Committee on
Science, Space, and Technology, U.S. House of Representatives .....................
Statement by Representative Brad Miller, Ranking Member, Subcommittee
on Energy and Environment, Committee on Science, Space, and Technology,
U.S. House of Representatives ............................................................................
20
21
21
23
24
25
Witnesses:
Dr. Anthony Cugini, Director, National Energy Technology Laboratory, Department of Energy
Oral Statement .................................................................................................
Mr. David Martineau, Chairman, Texas Independent Producers and Royalty
Owners Association
Oral Statement .................................................................................................
Dr. Daniel Hill, Interim Department Head, Professor and holder of the Noble
Chair in Petroleum Engineering, Texas A&M University
Oral Statement .................................................................................................
Mr. Michael Hagood, Director of Program Development, Energy and Environment Science and Technology, Idaho National Laboratory
Oral Statement .................................................................................................
27
30
36
39
46
48
56
58
Appendix I: Answers to Post-Hearing Questions

Dr. Anthony Cugini, Director, National Energy Technology Laboratory, Department of Energy ..............................................................................................
Mr. David Martineau, Chairman, Texas Independent Producers and Royalty
Owners Association ..............................................................................................
Dr. Daniel Hill, Interim Department Head, Professor and holder of the Noble
Chair in Petroleum Engineering, Texas A&M University ................................
Mr. Michael Hagood, Director of Program Development, Energy and Environment Science and Technology, Idaho National Laboratory ..............................
(III)
80
81
82
83
IV
Page
Appendix II: Additional Material for the Record

Letter submitted by Chairman Ralph M. Hall from the American Geosciences
Institute in support of H.R. 6603 ........................................................................
The new Boom: Shale gas fueling an American industrial revival, Article,
Washington Post ..................................................................................................
Oil and Natural Gas Generate EMPLOYMENT and TAX REVENUE, submitted by Mr. David Martineau ..........................................................................
90
92
97
TAPPING AMERICAS ENERGY POTENTIAL

THROUGH RESEARCH AND DEVELOPMENT
FRIDAY, NOVEMBER 30, 2012
HOUSE OF REPRESENTATIVES,
SUBCOMMITTEE ON ENERGY AND ENVIRONMENT,
COMMITTEE ON SCIENCE, SPACE, AND TECHNOLOGY,
Washington, D.C.
The Subcommittee met, pursuant to call, at 9:34 a.m., in Room
2318 of the Rayburn House Office Building, Hon. Andy Harris
[Chairman of the Subcommittee] presiding.
(1)
2
RALPH M. HALL, TEXAS
CHAIRMAN
EDDIE BERNICE JOHNSON, TEXAS

RANKING MEMBER
U.S. HOUSE OF REPRESENTATIVES

2321 RAYBURN HOUSE OFFICE BUILDING
WASHINGTON, DC 20515-6301
1202) 225-6371
www.science.house.gov
Subcommittee on Energy & Environment
Tapping America's Energy Potential Through Research and Development
Friday, November 30, 2012

9:30 a.m. -11 :30 a.m.
2318 Rayburn House Office Building
Dr. Anthony Cugini, Director, National Energy Technology Laboratory, Department of Energy
Mr. David Martineau, Chairman, Texas Independent Producers and Royalty Owners
Association
Dr. DanielHill, lnterim Department Head, Professor and Holder of Noble Chair in Petroleum
Engineering, Texas A&M University
Mr. Michael Hagood, Director of Program Development, Energy and Environment Science and
Technology, Idaho National Laboratory
u.s. HOUSE OF REPRESENTATIVES

HEARING CHARTER
Friday, November 30, 20]2
9:30 a.m. -11 :30 a.m.
2318 Rayburn House Office Building
PURPOSE
On Friday, November 30,2012 at 9:30 a.m. in Room 2318 of the Rayburn House Office
Building, the Science, Space, and Technology Subcommittee on Energy and the Environment
will hold a hearing titled, "Tapping America's Energy Potential Through Research and
Development." The purpose of the hearing is to receive testimony on research needs and
priorities relating to unconventional oil and natural gas resources. The Subcommittee will also
receive testimony on H.R. 6603, the "Tapping America's Energy Potential Through Research
and Development Act of 2012. ,,1
WITNESS LIST
Dr. Anthony Cugini, Director, National Energy Technology Laboratory, Department of

Energy
Mr. David Martineau, Chairman, Texas Independent Producers and Royalty Owners
Association
Dr. Daniel Hill, Interim Department Head, Professor and Holder of Noble Chair in
Petroleum Engineering, Texas A&M University
Mr. Michael Hagood, Director of Program Development, Energy and Environment
Science and Technology, Idaho National Laboratory
BACKGROUND
The United States currently ranks second and third in global natural gas and oil production,
respectively? The International Energy Agency (lEA) predicts the U.S. will overtake Saudi
Arabia to become the world's largest oil producer by 2020 (Figure 1).3 Domestic natural gas
production is also projected to increase substantially, due to an anticipated 170 percent increase
in shale gas production (Figure 2). America's resurgence as a leading global oil and gas producer
can be credited in part to the development of specific enabling technologies, particularly the
combination ofhorizoutal drilling and hydraulic fracturing.
I See Appendix A for the Section by Section Analysis of the 'Tapping America's Energy Potential Through
Research and Development Act of 201 2...
2 CIA World Factbook. Accessible at: https:llwww.cia.govllibrarvlpublications/the-worldfactbooklrankorderl2249rank.htrnl
'International Energy Agency, World Energy Outlook 2012. Accessible at: http://www.worldenergyoutiook.org!
u.s. to Leapfrog Saudis

The U.S. Is set to overtake
Saudi 011 output thooks to

unconventional reservoirs...
...whlle Its oil demand Is expected

to fall
U.S. oil demand VS. production,

in millions of barrels a day
Oil production,
20
In millions barrels a day
15
forecasts
I
'11 '15 '20 f25
0 Il....._ _ _ _--\!--\I_..l.-...l
1m
'11'15 '2(1 '25
5
Historically, conventional deposits have provided most of the oil and natural gas produced in the
United States. 67 Conventional resources are generally considered to be resources recovered from
a reservoir in which oil, natural gas, and water accumulate in a layered arrangement. Thus,
unconventional resources can be defined as what they are not; they are those resources that
cannot be produced, transported, or refined using traditional techniques. An unconventional
deposit is one in which the distribution of oil and gas is throughout a geologic formation over a
wide area, rather than within a discrete deposit. This category encompasses heavy oil, oil shale,
and oil sands, as well as oil and natural gas produced from shale formations and methane
hydrates.
Oil shale refers to geologic deposits in which the petroleum component, kerogen, has not
been fully transformed into oil or gas and must be heated to transform it into an upgraded
hydrocarbon.
Tight oil or oilfrom shale formations (shale oil) is produced using a combination of
horizontal wells and fracturing to unlock hydrocarbons locked in low permeability and
porosity siltstones, sandstones, and carbonates, or shale plays.
Shale gas or natural gas from shale formations refers to natural gas trapped in fine grain
sedimentary rock formations characterized by low permeability and porosity.
Department of Energy Unconventional Oil and Gas Programs

The Department of Energy's (DOE) Office of Fossil Energy (FE) manages research,
development, and demonstration (RD&D) activities for oil and gas technologies. Specifically,
FE's Office of Oil and Natural Gas "supports research and policy options to ensure
environmentally sustainable domestic and global supplies of oil and natural gas.,,8 The National
Energy Technology Laboratory (NEIL) serves as the lead FE RD&D facility and manages much
of FE's oil and gas technology research.
Whitney, Gene; Behrens, Carl E.; Glover, Carol. Congressional Research Service, "Us Fossil Fuel Resources:
Tenninology, Reporting, and Summary." November 30, 2010. Accessible at: Accessible at:
http://budget.house.gov/UploadedFiles/CRS NOVEMBER2010.pdf
7 For more infonnation on oil and gas resources, see Committee on Science, Space, and Technology Hearing
Charter, "Tapping America's Unconventional Oil Resources for Job Creation and Affordable Domestic Energy:
Technology and Policy Pathways," April 17, 2012, accessible at:
hltp:llscience.house.gov/sites/republicans.sciencc. house. gov/filcs/documents/hearingsIHHRG-112-SY-20120417SDOO I.pdf and Subcommittee on Energy and Environment Hearing Charter, "Supporting American Jobs and the
Economy Through Expanded Energy Production: Challenges and Opportunities of Unconventional Resources
Technology," May 10, 2012, accessible at:
http://science.house.gov/siteslrepublicans.science.house.govlfilesldocumentslhearingsIHHRG-112-%20SY2020120S10-SDOOl.pdf
& U.s. Department of Energy, Office of Oil & Natural Gas, updated May 7,2012. Accessible at:
htlp:llwww.fossil.energy.gov/programs/oilgas/indcx.html
6
6
Table 1. Department of Energy Unconventional Oil and Gas Funding (dollars in millions).
Program
FY2012
Enacted
FY
2013
Request
H.R. 5325, the "Energy

and Water Development
and Related Agencies
Appropriations Act,
2013."
S. 2465, "Energy
and Water
Development and
Related Agencies
Appropriations Act,
2013."
Unconventional FE
Technologies From
Petroleum - Oil
Technologies
$5.0
$0
$0'
$5.0
Natural Gas
Technologies
$5.0
$12.0
$10.0**
$12.0*'
Gas Hydrates
$10.0
$5.0
$5.0
$10.0
'House Appropnattons commIttee mark recommended $25 mllhon " to be used to support both research to Inlprove
the economics of oil productions from shale oil, as well as to reduce the health, safety, and environmental risks
associated with shale oil extraction'" By a vote of 208-207, the funding was removed during floor consideration. 10
,. Funding to support DOE/EP AlUSGS Interagency Collaboration. See "Interagency Effort on Shale
Developmenl."
Federal Unconventional Oil Research and Development Activities and Legislative History
Efforts to economically produce various sources of unconventional oil and gas were undertaken
throughout much of the last century. 11 Recently, significant technology advances and high crude
oil prices have regenerated interest in unconventional fuels production. The development of
horizontal drilling pennitted the use of hydraulic fracturing to economically produce shale oil
and gas. Shale oil production enabled the development of the Bakken fields in North Dakota.
North Dakota is now the second largest oil producing state, producing over 674,066 bpd, up from
45,000 bpd in 2007. 12
House Appropriations Committee Report, "Energy and Water Development Appropriations Committee Report, FY
2013." P. 97. Accessible at: http://appropriations.house.gov!UploadedFilesIEW-FY13FULLCOMMITTEEREPORT.pdf
JO Roll no. 340 on House Amendment 1186
" INTEK, Inc., Prepared for the US Departtnent of Energy, Office of Petro Ie lim Reserves, "Oil Shale Research in
the United States: Profiles of Oil Shale Research and Development Activities in Universities, National Laboratories,
and Public Agencies," Third Edition, September 20 II. Accessible at:
http://www.unconventionalfuels.org/publications/reports/Rcsearch Project Profiles Book2011.pdf
"North Dakota Petroleum Council, North Dakota Oil and Gas Industry Facts and Figures, September 17, 2012.
Accessible at: http://www.ndoil.org/image/cache/Facts and Figures 2012 9.17.pdf
9
7
Energy Policy Act of 1992
Section 2012 of the Energy Policy Act of 1992 (EPACT '92) established a five year program to
support rcsearch and development of oil shale extraction and conversion. 13 The program
intended to support the development of economically competitive and environmentally
acceptable technologies to produce oil shale in both the eastern and western oil shales. Section
2013 of EPACT '92 also created a five year program to increase the recoverable natural gas
resource base through more intensive recovery of conventional natural gas, as well as the
extraction of natural gas from tight gas sands, Devonian shales, or other unconventional
resources. 14
Energy Policy Act of2005
Section 369 of the Energy Policy Act of 2005 (EPACT '05) also contained provisions to
facilitate the development of unconventional fuels. IS For example, EPACT '05 directed the
Bureau of Land Management (BLM) to begin leasing Federal lands for the purpose of oil shale
and tar sands research and development (R&D) activities. The first round of research,
development, and demonstration leases were awarded in 2006. A second round ofleases were
offered in 2009, resulting in two awards.
Recent Federal Oil Shale-Related Activities
Section 369 of EPACT '05 deelared oil shale and other unconventional resources as strategically
important domestic energy resources that should be developed to mitigate the nation's
dependence on foreign sources of oil and directed the Secretary of Interior to develop a
cornmercialleasing program for these resources. Accordingly, in 2008, BLM formulated the
Final Oil Shale and Tar Sands Programmatic Environmental Impact Statement (PEIS).16 The
final PElS analyzed the environmental and socioeconomic impacts of amending 12 land use
plans in Colorado, Utah, and Wyoming to designate public lands administered by BLM as
available for commercial leasing and development.
In response to a 2009 lawsuit challenging the PElS, BLM re-examined the land allocations,
stating it would "reassess the appropriate mix of allowable uses with respect to oil shale and tar
sands leasin~ and potential development in light of Congress's policy emphasis on these
resources." I Following this review, BLM released a revised PElS, which makes approximately
677,000 acres available for commercial oil shale leasinij, and emphasizes R&D activities before
the leases can be utilized for commercial development. 8 This new proposal amends ten BLM
P.L. 102-486
!4Ibid.
IS P.L. 109-58
!6 See Department of Energy, "Oil Shale and Tar Sands Programmatic IS Information Center." Accessible at:
http://ostseis.anLgov/
!7 2012 Final Oil Shale and Tar Sands Programmatic Environmental Impact Statement: Introduction. Accessible at:
ht\p:llostseis.anLgov/documents/peis20 12/chp/OSTS Chapter l.pdf
"Ibid.
IJ
8
resource management plans, and represents a signification reduction from the 2008 plan, which
made available more than 2 million acres for commercial oil shale leasing. 19
Rccent Federal Shale Oil and Gas Efforts
On April 13, 2012, President Obama issued an executive order establishing a "high-level,
interagency working group to facilitate coordinated Administration policy efforts to support safe
and responsible unconventional natural gas development.,,2o As outlined in the order, the
interagency working group includes representatives from nine different agencies and four offices
of the White House, and will work to support the safe and responsible production of domestic
unconventional natural gas.
The group is tasked with coordinating agency policy activities and sharing scientific,
environmental, and related technical and economic information. The group is also to engage in
long-term planning and coordination among the appropriate Federal entities with respect to
research, resource assessment, and infrastructure developments, and is required to consult with
other agencies and offices as appropriate.
Multi-Agency Collaboration on Unconventional Oil and Gas Research
To execute the Executive Order, the Environmental Protection Agency, Department of Interior
and DOE signed a Memorandum of Understanding (MOU) in which they pledge to develop a
multi-agency program directed toward a focused, collaborative interagency effort to address high
priority challenges associated with unconventional shale gas and tight oil resources. 21 The stated
goal of this effort is to:
"address timely, policy relevant science directed to research topics where
collaboration among the three Agencies can be most effectively and efficiently
conducted to provide results and technologies that support sound policy decisions
by state and federal agencies responsible for ensuring the prudent development of
energy sources while protecting human health and the environment.,,22
The interagency program is also to address and respond to the White House's 2011 "Blueprint
for a Secure Energy Future" and recommendations made by the Secretary of Energy Advisory
Board Subcommittee on Natural Gas. 23
The agencies will identify research priorities and collaborate to sponsor work that improves
understanding of the impacts related to development of our unconventional resources. The
collaboration is intended to focus each Agency on its area of core competency, foster
collaboration on research topics as appropriate, and bring coordination and consistency to the
19 Taylor, Phil, Oil Shale: Cheers, jeers for final Interior plan for Colo., Wyo., and Utah. E&E News PM. November
9,2012. Accessible at: http://www.eenews.netleenewspmJ2012111/09/2
2President Barack Obama, "Executive Order-Supporting Safe and Responsible Development ofUneonventional
Domestic Natural Gas Resources," April 13, 2012. Accessible at: http://www.whitehouse.gov/the-pressoffice/20 I 2/04/1 3/executive-order-supporting-safe-and-responsibIe-development -unconvention
21 See Appendix B for the Memorandum of Understanding.
22 Memorandum of Understanding, DOE, DOT, EPA, April 13, 2012. Accessible at:
ht1p:llwww.epa.govlhydraulicfracture/oil and gas research mou.pdf
23 Ibid.
9
annual budget process. The three agencies have established a steering committee and are
currently in the process of formalizing a research plan, which is anticipated to be published in
January of2013.
The Administration requested $12 million annually for three years for DOE's portion of the
Interagency collaboration. The Housc Committee on Appropriations provided $10 million in the
Fiscal Year (FY) 2013 Energy and Water Appropriations bill to fund DOE's portion of the
collaboration and the Scnate Committee on Appropriations provided $12 million in the FY 13
Energy and Water Appropriations bill.
10
APPENDIX A
Section-by-Section Analysis
H.R. 6603 "Tapping America's Potential Through Research and Development Act of 2012"
Purpose: To authorize research, development, and demonstration activities that increase energy
security and affordability be enabling the safe and responsible production of the United States
vast domestic unconventional oil and gas resources.
Section 1: Short Title
The Tapping America's Energy Potential Through Research and Development Act of2012.
Section 2: Activities
This section expresses the purpose of the activities authorized in the legislation.
Section 3: Oil Shale Research and Development Activities
Section 3(a) authorizes research, development, and demonstration (RD&D) activities to facilitate
commercial application of energy technologies related to the exploration, development, and
production of oil shale resources.
Section 3(b) states that RD&D objectives are to address scientific and technological barriers to
enable economically feasible production of oil shale and minimize potential associated
environmental impacts.
Section 3(c) directs the Secretary of Energy to provide Congress an implementation plan that
details constraints and opportunities affecting oil shale development, identifies strategies to
enable such development, and identifies and prioritizes research, development and demonstration
activities and requires the Secretary to transmit this report to the House Committee on Science,
Space, and Technology, and the Senate Committee on Energy and Natural Resources 9 months
after enactment.
Section 3(d) allows the Assistant Secretary for Fossil Energy to conduct research and directs the
Assistant Secretary to make awards to eligible entities for RD&D activities in areas that include
(1) oil shale resource characterization; (2) modeling and simulation of oil shale exploration and
production technologies including advanced diagnostics and imaging systems and advanced
computing applied to the physics and chemistry of oil shale production; (3) minimization and reuse of water, including benchmarking of current water use rates for multiple production methods,
potential reduction in water volume needed for operations, and recovery utilization, reduction,
and improved management of produced water from exploration and production activities; (4)
efficient use of energy in exploration and production activities; (5) utilization and exploration
and production methods and materials that reduce the potential impact of such activities on the
environment, including improved production methods for in-situ mining and ex-situ mining.
Section 3(e) requires the Secretary of Energy to provide Congress a report on the progress of oil
shale research and development activities to the House Committee on Science, Space, and
Technology and Senate Committee on Energy and Natural Resources 3 years after enactment.
8
11
Section 3(f) authorizes $10,000,000 is authorized for each fiscal year from 2013 through 2017
for activities described in this Section.
Section 4: Shale Gas Extraction Research and Development Activities
Section 4(a) authorizes RD&D activities to facilitate commercial application of energy
technologies related to the exploration, development, and production of oil, natural gas, and
other liquid resources from shale formations.
Section 4(b) states that RD&D objectives are to maximize the benefits of the United States' shale
oil and natural gas resources by advancing safe and responsible exploration, development, and
production of shale oil and gas resources; minimize surface impacts from activities related to
shale oil and natural gas production; focus on areas that provide benefits to the public and to
industry; and advance the scientific and technological foundation available to producers, federal
and state government agencies, and other stakeholders in identified research areas.
Section 4(c) allows the Assistant Sccretary for Fossil Energy to conduct research and directs the
Assistant Secretary to make awards to eligible entities for RD&D activities in areas that include
(1) water use and demand, which may include potential reduction in the volume of water utilized
for shale oil and natural gas production, and alternative materials, substances, or ingredients for
use in shale oil and natural gas operations that could mitigate the need for or volume of water
used; (2) water sourcing, which may include expanding options for sources of water used in
shale oil and natural gas operations, and alternatives to groundwater or freshwater, such as but
not limited to water recovered from other industrial or agricultural operations, brackish water, or
surface water unsuitable for human or agricultural use in areas with water supply concerns; (3)
materials used in shale oil and natural gas operations which may include increasing the
efficiency of these operations by minimizing fluid use, improving the understanding of the
relationship between additives used in fracturing and the chemical and physical properties of
different shale formations, and enhancing permeability through improved proppants and other
materials; and (4) diagnostic imaging and monitoring, which may include increasing
understanding of the propagation of fractures within target zones, and advancing fundamental
technologies that enable improved tracking and enhanced understanding of fracture movements.
Section 4(d) authorizes $12,000,000 for each fiscal year from 2013 through 2015 for the
activities described in this Section.
Section 5: Prodnced Water Utilization Research and Development Activities
Section 5(a) authorizes RD&D activities for environmentally sustainable utilization of produced
water for agricultural, irrigational, recreational, power generation, municipal, and industrial uses,
or other environmental sustainable resources.
Section 5(b) allows the Assistant Secretary for Fossil Energy to conduct research and directs the
Assistant Secretary to make awards for RD&D activities, including improving safety and
minimizing environmental impacts of activities, in areas that include (1 ) produced water
recovery, including research for desalination and demineralization to reduce total dissolved
solids in the produced water; (2) produced water utilization for agricultural, irrigational,
municipal, and industrial uses, or other environmentally sustainable purposes; and (3) Reinjection of produced water into subsurface geological formations to increase energy production.
9
12
Section 5(c) authorizes $5,000,000 for each fiscal year 2013 through 2017 for activities
described in this Section
Section 6: Eligible Entities
Section 6 specifies entities eligible to receive funding for activities authorized by the bill. Those
entities include an institution of higher education, a national laboratory, a private sector entity, a
nonprofit organization, or a consortium thereof.
Section 7: Program Administration
Section 7 provides authority to the Secretary of Energy to enter into an agreement with a
consortium to carry out research, development, and demonstration activities.
Section 8: Coordination
Section 8 requires the Secretary of Energy to coordinate with, and avoid duplication of, research,
development, and demonstration activities with other DOE and Government programs.
Section 9: Cost Sharing
Section 9 requires all activities funded through the legislation follows cost sharing guidelines
established by Section 988 of the Energy Policy Act of2005.
Section 10: Limitations
Section 1O(a) prohibits the Department of Energy from funding research, development, and
demonstration activities in technology areas that industry by itself is not likely to undertake
because of technical and financial uncertainty.
Section I O(b) prohibits any activities funded through the legislation from supporting the
establishment of regulatory standards or requirements.
Section 1 t: Definitions
Section II provides definitions, including: Assistant Secretary, Institution of Higher Education,
National Laboratory, Oil Shale, Produced Water, Secretary, and Shale Oil and Natural Gas.
10
13
MEMORANDUM
TO:
APR 13 2012
Assistant Secretaries. National Laboratories
Department of Energy
Assistant Secretaries, Bureau Directors
Department of the Interior
Assistant Administrators, Regional Administrators
Environmental Protection Agency
FROM:
Arun Majumdar, Acting Under Secretary of Encrgy

ilt... . . .-
David J. Hayes, Deputy Secret~

Department of the Interior
ry ~ if
Bob Perciasepe, Deputy Administrator
Environmental Protection Agency
SUBJECT:
;f,,n!~
Multi-Agency Collaboration on Unconventional Oil and Gas Research
OVERVIEW: In March 2011, the White House released a "Blueprint tor a Secure Energy Future"
(Blueprint) - a comprehensive plan to reduce America's oil dependence, save consumers money, and
make our country the leader in clean energy industries. The Blueprint supports the responsible
development of the Nation's oil and natural gas, with the specific goals of promoting safe practices and
rcducing energy imports. The Department of Energy (DOE), the Department of the Interior (DOl), and
the Environmental Protection Agency (EPA) each will have a critical role to play in this mission. 1
To this end, the DOE, DOl, and EPA will develop a multi-agency program directed toward a focused
collaborative Federal interagellcy eflort to address the highest priority challenges associated with
safely and prudelltly developing uncollventional shale gas and tight oil resources. The goal of this
program will focus on timely, policy relevant science directed to research topics where collaboration
among the three Agencies can be most effectively and eniciently conducted to provide results and
technologies that support sound policy decisions by state and Federal agencies responsible for ensuring
the prudent development of energy sources while protecting human health and the environment.
This program responds to the Blueprint and to rclevant recommendations of the Secretary of Energy
Advisory Board Subcommittee on Natural Gas. 2
I The 31 March 2011 Whit(' Hous,' Bluqtrint for a Se"Uft" ENi?rgJl hlflln' instructed the Federal Government to "conduct research to
examine the impacts I,'Iffracking on water rcsourct~.'" directing the EPA and DOE to S(h.\llSOr fe:!arch ,....
: The Secretary of Energy Advisory Board recommended that "the fedcr,\l government has a f()lc es.pecially in hasic R&D. environment
protection. and satety" and fe~ommends that the nOE. DOl and EPA "all have mission responsibility that justify a continuing. tailored.
Federal R&D effort." hnp:l/www."i1alegas.encrgo .govlresourceslO81811 ~90_day.~.report_fin.Lpdf
14
2
Interagency Collaboration
The DOE, DOl, and EPA will identify research priorities and collaborate to sponsor research that
improves our understanding of the impacts of developing our Nation's unconventional oil and gas
resources and ensure the safe and prudent development of these resources. Through enhanced
cooperation, the Agencies will maximize the quality and relevance of this research, enhance synergies
between the Agencies' areas of expertise, and eliminate redundancy. The Agencies remain responsible
for implementing their own authorities and internal priority-setting processes.
The goals of this interagency collaboration are as follows:
I. Focus each Agencv on its area of core competency. Each Agency has a different combination of
experiences, research strengths, personnel, resources, and mission mandates leading to
complementary research core competencies.
&EPA
Core reSearch tpmperendes'
" Airmonitorlng
Environment and human health risk
Water quality
Collaboration
COllaboration
.I.ENERGy
Collaboration
Core reseaa;h competencies'

WeUboreintegrity, flow and
Con: research competencies-
control
Greentechnologies
Systems engineering, imaging
and materials
Resource assessment
Collaboration
Hydrology and geology

Land use, wildlife. and ecological
Impact
The Venn diagram summarizes the core research competencies of each of the three Agencies.
Further details can be found in the appendix to this memorandum.
2. Collaborate on research topics as appropriate, While each Agency will focus on its areas of core
research competency, there will be tasks for which the combined capabilities of more than one
Agency will be necessary to address a particular research topic.
15
3
An example of collaboration is research on water use for hydraulic fracturing, in which the EPA
focuses on the impacts and effectiveness of current technology, DOE focuses on improvements that
future technological innovations may yield, and USGS focuses on stream gage and groundwater
monitoring to determine water availability, use, and groundwater flow modeling. Another example
is the ongoing prospective case study in the Marcellus Shale that the three Agencies are currently
collaborating on in support of the EPA's congressionally mandated study on hydraulic fracturing.
Where practical and advisable, efforts will be made among the Agencies to apply common andlor
consistent monitoring, sampling, and analytical protocols. These and other topic areas are
represented by the green areas in the Venn diagram and will be further defined in the research plan
discussed in the section below.
3. Bring coordination and consistency to the annual budget process. Effective research requires a
sustained, well-planned effort. The three Agencies will work to ensure that the annual budget
process is part of a coordinated multi-year effort with targeted results.
Forming the Partnership
The three Agencies will take the following steps:

Interagency management structure: The three Agencies will create a Steering Committee to coordinate
the Agencies' activities for unconventional oil and gas research. Each Agency will contribute two
members to the Steering Committee: one member focused on policy and one member focused on
research and technology. The Office of Science and Technology Policy (OSTP) will also provide a
member to serve on the Steering Committee. The lead agency of the Steering Committee will rotate
annually among the three Agencies in alphabetical order: DOE, DOl, EPA. The Steering Committee
will provide leadership, coordinate the activities of the three participating Agencies, and reach out to
other relevant Federal, state and local organizations.
Formalizing a research plan: Within 9 months offormation, the Steering Committee will publish a
formal multi-year Research Plan that will:
a. analyze and synthesize the state of knowledge of unconventional oil and gas research to assist
in identifYing and prioritizing new research directions;
b. identifY, categorize, and prioritize research topics relevant to the safety and environmental
sustainability of unconventional oil and natural gas exploration and production;
c. identifY gaps in available data and appropriate activities to address these topics;
d. identifY research milestones and deliverables;
e. describe steps to promote transparency and maximize stakeholder participation and
notification;
f. establish specific mechanisms for cooperative relationships among the three member
Agencies in planning and conducting research and reviewing the results; and
g. determine future plans. goals and objectives.
16
4
Within 6 months of fonnation the Steering Committee will have a draft of the research plan prepared
for public comment.
As part of establishing the research plan, the Steering Committee will solicit comments from the
scientific community, public and relevant stakeholders and will hold periodic workshops for this
purpose, as appropriate.
Ongoing collaboration: The Steering Committee, augmented by appropriate staff, will meet on a
quarterly basis to discuss research efforts being conducted under the research plan, track key
milestones, identity and address any implementation challenges, and ensure that work in the priority
areas is carried out efficiently and effectively.
Initial engagement: The Steering Committee will hold its inaugura1 meeting within one month of the
effective date of this memorandum. In this meeting, the three member Agencies will nominate
members to serve on the Steering Committee, and will further refine as necessary the steps outlined in
this memorandum.
Progress Report: The three Agencies will issue an annual public progress report in conjunction with
the budget process providing an update on the status of research under way in the previous year,
including significant findings, progress toward milestones set forth in the research plan, and any
changes in research direction or focus planned for the following year.
17
5
Appendix: Agency Roles and Core Competencies
The DOE has research experience and capabilities in wellbore integrity, flow and control; green
technologies; and complex systems, imaging, materials, earth science and engineering. Practices
employed by companies engaging in exploration and production of shale gas evolve rapidly. An
understanding of these technologies and practices is critical if the Federal Government is to
accurately quantify the risks of these activities.
Wellbore integrity. flow and control: The DOE capabilities in this area include experience and
expertise in quantifying, evaluating, and mitigating potential risks resulting from the production
and development of the shale gas resources, to include multi-phase flow in wells and reservoirs,
well control, casing, cementing, drilling fluids, and abandonment operations associated with
drilling, completion, stimulation and production operations. The DOE has experience in evaluating
seal-integrity and wellbore-integrity characteristics in the context of protection of groundwater.
Green technologies: The DOE has experience and expertise in the development of a wide range of
new technologies and processes, to include innovations whieh reduce the environmental impact of
exploration and production such as greener chemicals or additives used in shale gas development,
flowback water treatment processes and water filtration technologies. Data from these research
activities assists regulatory agencies in making a science-based cost-benefit analysis of requiring
producers to adopt new technologies to mitigate environmental risks.
Systems engineering. imaging and materials: The DOE specializes in the development of
complex, engineered systems, high-speed computing and predictive modeling, and has experience
in quantifying and mitigating low-frequency, high-impact risks. This includes evaluating human
factors which potentially contribute to failures. The DOE has developed and evaluated novel
imaging technologies for areal magnetic surveys for the detection of unmarked abandoned wells,
and for detecting and measuring fugitive methane emissions from exploration, production, and
transportation facilities. The DOE also has experience in understanding of fundamental
interactions caused during the drilling process, such as the equation of state research that
investigates the relationship between pressure, temperature, and viscosity of multi-phase fluids at
the high temperatures and pressures associated with deep drilling and hydraulic fracturing. The
DOE's experience in engineered underground containment systems for C02 storage brings
capabilities that are relevant to the challenges of safe shale gas production, such as evaluating
cement-casing integrity in corrosive environment to characterize long-term wellbore integrity for
C02 sequestration.
18
6
Department of the Interior:

The United States Geological Survey (USGS) has research experience and capabilities in resource
assessments; natural systems, geology, hydrology; and evaluation of effects on land use, wildlife
and ecological systems.
Resource Assessment: The USGS conducts research and assessments of the undiscovered,
technically recoverable oil and gas resources of the United States (exclusive of the Federal Outer
Continental Shelf). The USGS assessments use a geology-based assessment methodology that
characterizes the total petroleum system considering source rock richness, petrophysical properties,
thermal maturation, petroleum generation, migration, and reservoir rock as important factors in
evaluating the hydrocarbon accumulation. Assessments incorporate uncertainty, are fully risked,
and are reported as statistical estimates of gas, oil, and natural hydrocarbon liquids content. They
support analyses to determine those resources that are economically recoverable. These
assessments play an important role in Federal policymaking and land management and also support
decision making at tribal, state and local levels.
Geology and Hydrology: Understanding the stratigraphy, physical trapping mechanisms,
petroleum geochemistry, and stress conditions of unconventional basin gas and oil-bearing
formations is critical to determining local and regional variations in gas and oil abundance,
composition, and quality that identifY rock furmation targets and guide operational plans for
drilling and hydrofracturing, and for understanding and forecasting the composition of produced
waters. The USGS expertise in earthquake seismology, geothermal systems, and geologic carbon
sequestration is appropriate for induced seismicity evaluation. Down hole rock composition, native
and flowback fluid composition, borehole temperature and pressure, and in situ stress levels are
used to generate groundwater flow models and geochemical models that provide estimates of
solute transport and rates and the potential fate of injected waters and their constituents. The
USGS operates more than 7,700 of the Nation's surface water streamgages and groundwater
monitoring wells each of which provide data critical for assessing and modeling water availability
and water quality important to understanding water use, contaminant occurrences, flood hazards,
and ecological flows. Cooperative agreements with state and local agencies provide additional
data. Water quantity and quality are potentially affected by energy production activities. The
USGS maintains an extensive, nationwide water monitoring capability and conducts assessments of
surface and groundwater availability throughout the Nation, including both fresh and brackish
groundwater resources.
Land Use, Wildlife, and Ecologic Impact: The USGS has diverse capabilities to evaluate potential
impacts to biological resources and the water resources available to sustain them due to activities
associated with shale gas and tight oil production. Landscape scale research is important to
quantifying the response of key species and habitats to land disturbance, contaminants, and other
potential impacts resulting from development of shale gas and tight oil resources and to develop
best management practices to mitigate impacts. Remotely sensed airborne imagery is used to
assess forest fragmentation and effects of shale gas activities on land use patterns, wetlands, and
migratory bird popUlations. The USGS also assesses the effects of habitat change on key aquatic
species including endangered species affected by hydrocarbon production.
19
7
Environmental Protection Agency:

The EPA has research experience and capabilities across a wide range of scientific and technical
disciplines that support the Agency's mission of protecting human health and safeguarding the
environment. This includes core competencies in the areas of environmental and human health risk
assessment, air quality, and water quality. The EPA has the unique ability to conduct research that
spans the characterization of sources and emissions, to pollutant fate and transport, to ecosystem
and human exposures, health effects and risk assessment, and to the prevention and management of
environmental risks.
Environmental and Human Health Risk: The EPA has extensive capabilities to characterize the
effects of contaminants and environmental stressors on ecosystem integrity and human health for
air and water contaminants and mixtures associated with gas extraction practices. Ecological
research capabilities that support risk assessments focus on evaluating potential physical, chemical,
and biological changes to ecosystems, disruptions of ecological flows in headwater rivers, and
impacts on terrestrial wildlife, stream macrobenthos, and fish. The Agency also has the expertise
to evaluate landscape pattern changes in terms of available habitat and changes in vulnerability for
rare or unique ecosystems. The EPA research capabilities that support human health risk
assessments include conducting field measurements and other types of studies to characterize
exposures, performing laboratory and computational toxicology studies for hazard identification
and dose response assessments, and developing and applying risk assessment methods to evaluate
human health risks posed by environmental contaminants.
Air Quality: The EPA possesses expertise in the measurement and modeling of air poIlutants from
sources related to all phases of gas extraction, processing, storage, and distribution. This includes
using mobile and fixed air monitoring systems to estimate local, regional, and national exposures to
air pollutants.
Water Quality: Groundwater protection research capabilities at the EPA include quantifying the
effects of exploration and production activities on ground water quantity and quality, conducting
subsurface hydrogeological and geochemical modeling, evaluating weIl integrity issues, and
assessing the potential for releases to groundwater from wells or surface impoundments during
drilling, completion. operation or post closure.
20
Chairman HARRIS. The Subcommittee on Energy and Environment will come to order.
Good morning, everyone. Welcome to todays hearing entitled
Tapping Americas Energy Potential through Research and Development. In front of you are packets containing the written testimony, biographies and Truth in Testimony disclosures for todays
witness panel. I now recognize myself for five minutes for an opening statement.
Let me begin by noting that this is expected to be the last Energy and Environment Subcommittee hearing of this Congress. I
would like to thank Ranking Member Miller and the members of
the Subcommittee for working together to consider and address
issues of great importance to the future of our country.
As we have highlighted throughout this Congress, the United
States has a wealth of untapped unconventional energy resources.
In fact, the International Energy Agency recently predicted the
United States will overtake Saudi Arabia to become the worlds
largest oil producer by 2020, largely due to the potential for development of U.S. unconventional energy resources. The significant
positive economic benefits associated with development of unconventional energy resources are widely acknowledged. Tapping
Americas unconventional oil and gas resources will additionally
provide sorely needed stimulation of our economy, restore our manufacturing sector and create high-paying middle-class jobs.
Citigroup predicts the cumulative impact of new oil and gas production could create as many as 3.6 million new jobs by 2020. Unfortunately, the degree to which the United States will pursue and
realize these much-needed benefits remains in doubt, primarily due
to politics.
Under Chairman Halls leadership, the Science, Space, and Technology Committee and this Subcommittee in particular have explored a broad range of energy production-related issues, from the
lack of transparency and weak scientific foundations underlying
EPAs job-killing regulations to the waste and imbalance in Department of Energys research and development activities. Unfortunately, time and again, a massive disconnect between the Presidents words and his Administrations actions are evident. While
President Obama continues to claim he supports an all-of-the-above
energy strategy, the plain facts tell a different story. This was
clearly illustrated in May when DOEs Assistant Secretary for Fossil Energy testified to this Subcommittee that oil shale was a component of the Administrations all-of-the-above energy strategy. Yet
when pressed, he acknowledged that DOE was not spending any
funding on oil shale R&D, and could not identify anything the Administration was doing to actively advance oil shale. In fact, despite the Presidents prominent call for an all-of-the-above energy
strategy in this years State of the Union speech, just recently the
Administration finalized a plan effectively reducing lands available
for oil shale production by two-thirds.
Unfortunately, the Administrations rhetoric on energy production is similarly empty when it comes to shale gas and hydraulic
fracturing, where the EPA is leading 13 federal agencies and offices
in pursuit of new ways to regulate this incredibly beneficial and
safe technology.
21
Chairman Halls legislation, the Tapping Americas Energy Potential Through Research and Development Act of 2012, addresses
the obvious imbalance in DOE research priorities. It restores a true
all-of-the-above R&D focus at DOE through authorization of limited
and targeted research and development activities that develop key
technologies relating to oil shale, shale oil and gas, and produced
water utilization.
[The prepared statement of Mr. Harris follows:]
PREPARED STATEMENT
OF
SUBCOMMITTEE CHAIRMAN ANDY HARRIS
Good morning and welcome to this mornings hearing entitled Tapping Americas
Energy Potential Through Research and Development.
Let me begin by noting that this is expected to be the last Energy and Environment Subcommittee hearing of this Congress. I would like to thank Ranking Member Miller and the Members of the Subcommittee for working together to consider
and address issues of great importance to the future of our country.
As we have highlighted throughout this Congress, the United States has a wealth
of untapped unconventional energy resources. The International Energy Agency recently predicted the U.S. will overtake Saudi Arabia to become the worlds largest
oil producer by 2020, largely due to the potential for development of U.S. unconventional energy resources. The significant positive economic benefits associated with
development of unconventional energy resources are widely acknowledged. Tapping
Americas unconventional oil and gas resources will additionally provide sorely needed stimulation of our economy, restore our manufacturing sector and create highpaying middle class jobs. Citigroup predicts the cumulative impact of new oil and
gas production could create as many as 3.6 million new jobs by 2020. Unfortunately,
the degree to which the U.S. will pursue and realize these benefits remains in
doubt, primarily due to politics.
Under Chairman Halls leadership, the Science, Space, and Technology Committeeand this subcommittee in particularhas explored a broad range of energy
production-related issues, from the lack of transparency and weak scientific foundations underlying EPAs job-killing regulations to the waste and imbalance in Department of Energys research and development activities. Unfortunately, time and
again, a massive disconnect between the Presidents words and his Administrations
actions are evident.
While President Obama continues to claim he supports an all-of-the-above energy strategy, the plain facts tell a different story. This was clearly illustrated in
May when DOEs Assistant Secretary for Fossil Energy testified to the subcommittee that oil shale was a component of the Administrations all-of-the-above
energy strategy. Yet when pressed, he acknowledged DOE was not spending any
funding on oil shale R&D, and could not identify anything the Administration was
doing to actively advance oil shale. In fact, despite the Presidents prominent call
for an all of the above energy strategy in this years State of the Union speech, just
recently the Obama Administration finalized a plan effectively reducing lands available for oil shale production by two thirds.
Unfortunately, the Administrations rhetoric on energy production is similarly
empty when it comes to shale gas and hydraulic fracturing, where the EPA is leading 13 Federal agencies and offices in pursuit of new ways to regulate this incredibly beneficial and safe technology.
Chairman Halls legislation, the Tapping Americas Energy Potential Through Research and Development Act of 2012, addresses the obvious imbalance in DOE research priorities. It restores a true all-of-the-above R&D focus at DOE through authorization of limited and targeted research and development activities that develop
key technologies relating to oil shale, shale oil and gas, and produced water utilization.
Chairman HARRIS. At this time I would like to yield to the Chairman of the Science, Space, and Technology Committee for three
minutes for him to describe his legislation. Chairman Hall.
Chairman HALL. Mr. Chairman, I thank you very much, and you
have done a very good job of your opening statement. You just
about said it all. I say to you good morning, and I thank you for
yielding the time you have given me.
22
I want to thank the witnesses for being here to talk about an
issue that is very important to me and to all of us, and in particular, I would like to recognize and thank Dr. Daniel Hill, the
Chair of Texas A&M Petroleum Engineering Department, and I
had a good visit with your president two Saturdays ago, I think,
when they created Johnny Football down there and we are waiting
to see what they do with it, and Dr. Martineau, the Chairman of
the Texas Independent Producers and Royalty Owners Association,
TIPRO, a great organization that I am very familiar with, and I
think that you started out with Frank and Shelby Pitts and they
are still with the Pitts organization. Is that correct?
Mr. MARTINEAU. Yes.
Chairman HALL. How many?
Mr. MARTINEAU. Forty years.
Chairman HALL. Well, you are probably getting old to do things
like that.
But energy policy is and has always been one of my very top priorities, both as a Member, and as Chairman of this Committee. I
believe strongly that for young people today, the importance of energy and how important energy is and the fact that nations including our Nation will fight for energy if we dont have energy and we
shouldnt have to because we have plenty, and I am very hopeful
for this next two years that we can use what we have and be users
of our own and salespeople of some will have in addition if we just
do what we ought to do like all of the above. A lot of people talk
all of the above and do none of the above, and that is what our
problem is. I think after prayer, energy is probably the most important word in the dictionary to youngsters that are graduating
from high school, grade school or college. It is the foundation upon
which our Nation has prospered, and the key to our quality of life
and standard of living.
That is why I introduced H.R. 6603, which would increase energy
security through support for research and development to enable
prudent development of U.S. domestic energy resources. The legislation builds on the record of the Science, Space, and Technology
Committee during our tenure here this last two years.
The United States is blessed with a wealth of unconventional energy resources and we are currently experiencing a revolution in oil
and gas production thanks to those resources. This increased production is not only increasing our energy security, it is stimulating
our economy and creating much-needed jobs. In 2010, unconventional natural gas development alone supported over a million jobs
in this country, and this number is expected and could more than
double by 2035.
This bipartisan legislation promotes the development of oil shale
instead of restricting it, and ensures that we maximize the benefits
of our unconventional oil and gas resources. The bill directs the Department of Energy to undertake R&D activities to address the scientific and technological barriers to oil shale development. It also
supports R&D to minimize water use and maximize efficiency in
shale oil and gas operations. The legislation includes language from
the Produced Water Utilization Act, a bill I sponsored and others
that was sponsored in the 111th Congress and passed through the
House with unanimous consent.
23
In 2005, we worked together on and I authored Section 999 of
the Energy Policy Act, which created a very successful Department
of Energy unconventional oil and gas research and development
program. The bill before us today is intended to complement the
ongoing 999 program, which is a program that we knew energy was
there in the Gulf but we couldnt get it up, couldnt get it to the
top. We needed technology to get it to the top. We traded with a
lot of universities. They would give us the technology, and we
would pay them with the energy they got to the top. If we didnt
get their technology, it didnt go to the top. If we did get their technology, it did, and it has worked very well. They take shots at it
every year but it is so valuable that I am hopingit is currently
set to expire in 2014 and I hope they are going to continue it beyond that, and I think they will, as well as provide direction for
the DOE oil shale R&D activities and the Administrations proposal
for an interagency R&D collaboration on unconventional energy resources. The only thing that can stop this amazing story from continuing is politics, specifically, the Environmental Protection Agencys thinly veiled campaign to restrict access to these resources.
In closing, I will just say the bill I am introducing today will help
to provide a check against EPAs war on energy by addressing environmental challenges through technological solutions instead of
job-killing regulations.
I would like to ask unanimous consent to enter into the record
a letter from the American Geosciences Institute in support of H.R.
6603, and I look forward to hearing from our witnesses today, and
I yield back, and Mr. Chairman, I ask unanimous consent to enter
into the record that letter.
[The prepared statement of Mr. Hall follows:]
PREPARED STATEMENT
OF
COMMITTEE CHAIRMAN RALPH M. HALL
Good morning and thank you Chairman Harris for yielding me time. I want to
thank the witnesses for being here to talk about an issue that is very important
to me. In particular, I would like to recognize and thank Dr. Daniel Hill, the Chair
of Texas A&M Petroleum Engineering Department, and Mr. David Martineau, the
Chairman of the Texas Independent Producers and Royalty Owners Association
(TIPRO).
Energy policy is and has always been one of my top priorities, both as a Member,
and as Chairman of this Committee. I believe strongly that, after prayer, energy is
the most important word in the dictionary. It is the foundation upon which our nation has prospered, and the key to our quality of life and standard of living.
That is why I introduced H.R. 6603, which would increase energy security
through support for research and development to enable prudent development of
U.S. domestic energy resources. This legislation builds on the record of the Science,
Space, and Technology Committee during my tenure as Chairman.
The U.S. is blessed with a wealth of unconventional energy resources and we are
currently experiencing a revolution in oil and gas production thanks to those resources. This increased production is not only increasing our energy security, it is
stimulating our economy and creating much needed jobs. In 2010, unconventional
natural gas development alone supported over a million jobs in this country, and
this number is expected to more than double by 2035.
This bipartisan legislation promotes the development of oil shale instead of restricting it, and ensures we maximize the benefits of our unconventional oil and gas
resources. The bill directs the Department of Energy to undertake R&D activities
to address the scientific and technological barriers to oil shale development. It also
supports R&D to minimize water use and maximize efficiency in shale oil and gas
operations. The legislation includes language from the Produced Water Utilization
Act, a bill I sponsored in the 111th Congress and passed through the House with
unanimous consent.
24
In 2005, I helped author Section 999 of the Energy Policy Act, which created a
very successful Department of Energy unconventional oil and gas research and development program. The bill before us today is intended to complement the ongoing
999 program-which is currently set to expire in 2014 but I hope will continue beyond that-, as well as provide direction for the DOE oil shale R&D activities and
the Administrations proposal for an interagency R&D collaboration on unconventional energy resources.
The only thing that can stop this amazing story from continuing is politics-specifically, the Environmental Protection Agencys thinly veiled campaign to restrict access to these resources. The bill Im introducing today will help to provide a check
against EPAs war on energy by addressing environmental challenges through technological solutions instead of job-killing regulations.
I would like to ask unanimous consent to enter into the record a letter from the
American Geosciences Institute in support of H.R. 6603.
I look forward to hearing from our witnesses today, and I yield back.
Chairman HARRIS. Without objection.

[The information appears in Appendix II]
Chairman HARRIS. Thank you, Chairman Hall, and Mr. Chairman, it is of course been a pleasure to work with you the last two
years, and I realize that the room has been brightened up a little
bit by a new picture hanging on the wall opposite the Chairmans
podium here. Yeah, that is appropriate.
Chairman HALL. Can I tell you something about it?
Chairman HARRIS. I will yield to the Chairman.
Chairman HALL. I dont know how long it took him to do it, but
he looked at me for about an hour and a half and took a thousand
pictures and then he brought the picture in a box down to my
house in Rockwell and he opened it up, and I said Oh, my God.
I looked at it, and I said Its terrible. He said, Well, I have my
things here. I can touch it up. What is your problem with it? I
said, Well, I dont think you can improve on it. He said I can do
whatever you ask me to do. What is the problem with it? I said,
The main problem, it looks just exactly like me. Anyway, he
eased up a little bit, but he did a good job, and thank you, Mr.
Chairman.
Chairman HARRIS. Thank you, Mr. Chairman Hall.
I want to again thank the witnesses here today and now yield
to the ranking member, Mr. Miller, for an opening statement.
Mr. MILLER. Thank you, Mr. Chairman.
Before I begin, I would like the opportunity to welcome our newest member, David Curson. Congressman Curson occupies the seat
left by Thaddeus McCotter representing the 11th District of Michigan. He will not be a Member of the new Congress so he will probably not have the opportunity Thad McCotter had to impress us
with his distinctive personality. He brings long experience as a
member of the United Auto Workers leadership and has a technical
background in manufacturing, which is a welcome addition to this
Congress. So we do welcome him.
Mr. Chairman, we obviously have some disagreement about what
would constitute an all-of-the-above energy policy. The lesson for
todays hearing is from the Book of Matthew: For to the one who
has, more will be given, and he will have in abundance, and from
the one who has not, even what he has will be taken away. Or
as many Americans put it colloquially, them that has, gets. That
has certainly been the Republican policy on energy research.
25
Our efforts to assist emerging energy technologies like solar, geothermal, wind, and technologies to make our energy use more efficient are considered green pork to House Republicans. They have
opposed efforts by the Department of Energy to promote research,
demonstration projects, and commercialization of emerging technologies as picking winners and losers. The Republicans Views and
Estimates for Fiscal Year 2012 gave deeply principled reasons for
opposition to government investment in emerging energy technologies, and I quote: Fundamentally, the act of providing individual firms with government money for the purpose of commercializing profitable technology is an inappropriate intervention in
the market that may crowd out or discourage a greater amount of
private investment.
So for emerging technologies that have not the economic and political power of incumbent fossil fuel and nuclear technologies, even
what they have will be taken away. But incumbent technologies,
which are already enormously profitable, will be given more, and
will have in abundance, with none of the navel-gazing discussion
about picking winners and losers or inappropriate interventions in
the market.
The incumbent technologies have benefited from government research for generations, government subsidies for generations, including research. Hydraulic fracturing is the combination of technologies developed by federally funded research. We will obviously
continue to depend on fossil fuel technologies for most of our energy
well into the future. Many Democrats, including me, have supported government funding for fossil fuels research, and will likely
support this legislation as well. The section of Chairman Halls legislation on produced water is almost identical to legislation passed
by the Democratic majority in the last Congress. The industries
and yes, the specific individual firms that will benefit most directly
from this legislation, already have far more public and private investment in applied research and commercialization of technologies
than do firms developing alternative energy technologies, some of
which may dramatically alter our energy future and some of which
may never be commercially viable.
Even more important, continued support in abundance for incumbent technologies, often to the exclusion of alternative technologies, continues to base our energy future almost exclusively on
hunting fossil fuels to extinction, leaving us woefully unprepared
for our longer-term energy needs.
Mr. Chairman, I suspect that most Democrats will support this
legislation if it comes to a vote, but I hope that Republicans will
consider whether the arguments in support of this legislation will
be equally applicable to research for alternative energy sources so
that we can have truly an all-of-the-above energy policy.
I yield back the balance of my time.
[The prepared statement of Mr. Miller follows:]
PREPARED STATEMENT
OF
SUBCOMMITTEE RANKING MEMBER BRAD MILLER
The lesson for todays hearing is from the Book of Matthew: For to the one who
has, more will be given, and he will have in abundance, and from the one who has
not, even what he has will be taken away. Or as many Americans put it more
colloquially, them that has, gets.
That has certainly been the Republican policy on energy research.
26
Our efforts to assist emerging energy technologies like solar, geothermal, wind,
and technologies to make our energy use more efficient are considered green pork
to House Republicans. They have opposed efforts by the Department of Energy to
promote research, demonstration projects, and commercialization of emerging technologies as picking winners and losers. The Republicans Views and Estimates for
Fiscal Year 2012, gave deeply principled reasons for opposition to government investment in emerging energy technologies: Fundamentally, the act of providing individual firms with government money for the purpose of commercializing profitable
technology is an inappropriate intervention in the market that may crowd out or
discourage a greater amount of private investment.
So for emerging technologies that have not the economic and political power of
incumbent fossil-fuel and nuclear technologies, even what they have will be taken
away.
But incumbent technologies, which are already enormously profitable, will be
given more, and will have in abundance, with none of the navel-gazing discussion
about picking winners and losers or inappropriate interventions in the market.
The incumbent technologies have benefited from government subsidies for generations, including funding for research. Hydraulic fracturing is the combination of
technologies developed by federally-funded research. We will obviously continue to
depend on fossil fuel technologies for most of our energy well into the future. Many
Democrats, including me, have supported government funding for fossil fuels research, and will likely support this legislation as well. The section of Chairman
Halls legislation on produced water is almost identical to legislation passed by the
Democratic majority in the last Congress.
The industries and yes, the specific individual firms that will benefit most directly from this legislation, already have far more public and private investment in
applied research and commercialization of technologies than do firms developing alternative energy technologies, some of which may dramatically alter our energy future and some of which will never be commercially viable. Even more important,
continued support in abundance for incumbent technologies, often to the exclusion
of alternative technologies, continues to base our energy future almost exclusively
on hunting fossil fuels to extinction, leaving us woefully unprepared for our longerterm energy needs.
Mr. Chairman, I suspect that most Democrats will support this legislation if it
comes to a vote, but I hope that Republicans will consider the arguments in support
of this legislation as arguments for a truly all of the above energy policy.
I yield back the balance of my time.
Chairman HARRIS. Thank you very much, Mr. Miller, and I join
you in welcoming Mr. Curson to the Science, Space, and Technology Committee, and I welcome him sitting in on the Subcommittee hearing today.
If there are Members who wish to submit additional opening
statements, your statements will be added to the record at this
point.
At this time I would like to introduce our witness panel. Our
first witness today is Dr. Anthony Cugini. Dr. Cugini is the Director of the National Energy Technology Laboratory for the Department of Energy. He previously served as Director of the Office of
Research and Development at the National Energy Technology
Laboratory. Before that position, Dr. Cugini served as the Focus
Area Lead for NETLs Computational and Basic Sciences Focus
Area. He has been at the laboratory since 1987.
Our next witness is Dr. David Martineau. Dr. Martineau is the
Chairman of the Texas Independent Producers and Royalty Owners
Association. Mr. Martineau has worked in the oil and gas industry
for more than 50 years. He is an active member of the American
Association of Petroleum Geologists, the Interstate Oil and Gas
Compact Commission, and the Barnett Shale Water Conservation
and Management Committee.
Our third witness is Dr. Daniel Hill, who is the Interim Department Head, a Professor and holder of the Noble Chair in Petroleum
27
Engineering at Texas A&M. Previously, he taught for 22 years at
the University of Texas at Austin after spending five years in industry. He is the author of the Society of Petroleum Engineering
monograph Production Logging: Theoretical and Interpretive Elements, co-author of the textbook Petroleum Production Systems,
co-author of an SPE book, Multilateral Wells and author of over
150 technical papers and holds five patents.
Our final witness is Mr. Michael Hagood. Mr. Hagood is the Director of Program Development for Energy and Environment
Science and Technology at the Idaho National Laboratory. He is responsible for developing programs advancing energy innovation
and also for designing and implemented INLs regional energy sector strategy, notably the western energy corridor concept. Mr.
Hagood joined INL in 2003 and previously has also supported INL
national and homeland critical energy infrastructure programs.
Thank you all for appearing before the Subcommittee today. As
our witnesses should know, spoken testimony is limited to five minutes each after which the members of the Committee will have five
minutes each to ask questions.
I now recognize our first witness, Dr. Anthony Cugini, the Director of the National Energy Technology Laboratory at the Department of Energy, for five minutes.
STATEMENT OF DR. ANTHONY CUGINI, DIRECTOR,
NATIONAL ENERGY TECHNOLOGY LABORATORY,
DEPARTMENT OF ENERGY
Dr. CUGINI. Thank you. Chairman Harris, Ranking Member Miller and members of the Subcommittee, I appreciate the opportunity
to discuss the role that the Department of Energys Office of Fossil
Energy and National Energy Technology Laboratory continue to
play in the safe and responsible development of the Nations unconventional oil and natural gas resources.
As you know, since 2008, U.S. oil and natural gas production has
increased each year. In 2011, U.S. crude oil production reached its
highest level in nearly a decade. Natural gas production grew in
2011 as well, the largest year-over-year increase in history. Overall, oil imports have been falling since 2005, and our dependence
on imported oil declined from 57 percent in 2008 to 45 percent in
2011, the lowest level since 1995.
There are a number of unconventional resources with the potential to support the Presidents all-of-the-above strategy and to further reduce U.S. reliance on foreign oil. These include U.S. oil reservoirs amenable to CO2 EOR, heavy oil, oil shale, shale oil, and
natural gas resources to include methane hydrates.
Studies indicate that 24 billion barrels of residual oil may be recoverable with current CO2 EOR technologies and another 36 billion barrels with next-generation technology. For perspective, the
United States currently produces about 2 billion barrels of crude oil
per year and has proved reserves of about 23 billion barrels. The
National Coal Council estimates that another 33 billion barrels of
residual oil zone oil is recoverable at a crude oil price of $85 per
barrel.
In combination with oil shale, heavy oil, oil sands and shale oil,
EIA estimates that unconventional oil resources total more than
28
3,000 billion barrels of liquid hydrocarbons in place. Production of
unconventional natural gas resources has also risen sharply during
the past decade. Shale gas in 2012 in the United States is roughly
25 times what it was in 2000. EIA estimates that 482 trillion cubic
feet of unproven but technically recoverable natural gas exists,
more than 20 times 2011 annual natural gas consumption of 24
trillion cubic feet.
Even more abundant than shale gas is natural gas from methane
hydrate. The Bureau of Ocean Energy Management, Regulation
and Enforcement estimates in-place gas hydrate resources of
21,400 trillion cubic feet in the Gulf of Mexico, and the USGS estimates 85 trillion cubic feet on the North Slope of Alaska.
Implicit in the development of our unconventional oil and gas resources is that air and water quality and public health and safety
are not compromised. To this end, the Department signed a memorandum of agreement with the EPA and the USGS to address the
potential environmental, health and safety impacts of hydraulic
fracturing and the development of other unconventional fossil resources. The DOEs NETL is also carrying out research to quantify
and understand the risks of shale gas and shale oil development
as well as improve related unconventional oil and gas characterization and extraction technologies under Section 999 of the Energy
Policy Act of 2005, the Ultra-Deepwater and Unconventional Natural Gas and Other Petroleum Resources program. Just this week,
the selection of 15 new projects was announced as part of the Section 999 program.
Regarding methane hydrates, DOEs efforts have featured extensive interagency coordination and collaborations with leading international gas hydrate research organizations. Because of these efforts, hydrates have moved from a scientific curiosity in 2000 to a
known resource today.
DOE and NETL have a long history of success in unconventional
oil and gas research. Collaboration with industry in the 1970s and
1980s was a linchpin in the current shale gas revolution. Recent
successes include completion of a large-scale field test of natural
gas extraction from methane hydrates on the North Slope of Alaska. Also, Altela Incorporated will open two commercial water treatment facilities this year in Pennsylvania based on technology demonstrated under DOEs oil and gas program. NETL also conducts
onsite research that complements its extramural portfolio and it
leverages competencies and capabilities including expertise in resource characterization, technology development and environmental
monitoring to inform responsible, sustainable exploration of production of the Nations unconventional domestic gas resources.
Let me conclude by saying that the United States contains significant hydrocarbon wealth that can be extracted and used to provide economic benefits for all Americans. The Department is committed to developing the science and technology that will allow the
Nation to use its abundant fossil energy resources in a way that
balances the energy needs for sustaining a robust economy with
continued environmental responsibility. I recognize the developed
legislation that aids in supporting unconventional oil and gas research, and while we have not developed a position, I am pleased
that this legislation is focused on this important energy resource.
29
Mr. Chairman, this completes my prepared statement. I look forward to addressing any questions that you or the other Subcommittee members may have.
[The prepared statement of Dr. Cugini follows:]
30
Statement of
Anthony V. Cugini
Director, National Energy Technology Laboratory
U. S. Department of Energy
Before the
Subcommittee on Energy and Euvironment
Committee on Science, Space, and Technology
U.S. House of Representatives
November 30, 2012
Chairman Harris, Ranking Member Miller, and members of the Subcommittee, I appreciate the
opportunity to discuss the role that the Department of Energy's Office of Fossil Energy's
National Energy Technology Laboratory eontinues to play in the safe and responsible
development of the Nation's unconventional oil and natural gas resources.
As you know, since 2008, U.S. oil and natural gas production has increased each year. In 2011,
U.S. crude oil production reached its highest level in nearly a decade. Natural gas production
grcw in 2011 as well the largest year-over-year volumetric increase in history. Overall, oil
imports have been falling since 2005, and our dependence on imported oil declined from 57
percent in 2008 to 45 percent in 2011 - thelowest level since 1995.
One of the factors enabling us to make such progress is that our country enjoys a bounty of oil
and natural gas resources. Over the past century, Americans have applied their ingenuity towards
extracting these resources, which in tum have helped to fuel our Nation's economic prosperity.
Domestic Unconventional Oil and Natural Gas Resources

There are a number of unconventional resources with the potential to support the president's a1lof-the-above energy strategy and to help reduce U.S. reliance on foreign oil. These include U.S.
oil reservoirs amenable to carbon dioxide enhanced oil recovery (C02 EOR), heavy oil, oil shale,
shale oil, and natural gas resources including methane hydrates.
Studies have shown that 24 billion barrels of residual oil may be economically recoverable 1 with
the application of current C02-EOR technologies and another 36 billion barrels with widespread
application of "next generation" CO2 EOR technologl. For perspective, the U.S. currently uses
about 5.4 billion barrels of crude oil per year and has proved reserves of about 23 billion
barrels 3 . In addition to the post-waterflood residual oil left behind in producing oil reservoirs,
there are significant amounts of oil in "residual oil zones" or ROZs, the portion of an oil
reservoir below its estimated oil-water contact. These zones can extend for hundreds of feet and
1 Economically
recoverable at a price of$85 a barrel and $40 metric ton of C02.

Kuuskraa, T. Van Leeuwen, and M. Wallace. June 2011. Improving Domestic Energy Security and Lowering
C02 Emissions with "Next Generation" C02 Enhanced Oil Recovery. DOEfNETL report # 201111504
Table EX-3.
3 E1A production for 2011, http://www.eia.gov/dnav/petlpet crd crodn adc mbbl a.hlm
EIA reserves for end of 2010, http://www.eia.gov/dnav/pet/petcrdpresdcuNUSa.htm
2 V.
31
could hold large volumes of previously undocumented oil amenable to recovery via C02 EOR.
The National Coal Council estimates that 33 billion barrels ofROZ oil is recoverable at a crude
oil price of$85 per barrel 4 .
In addition to the residual oil and ROZs, oil shale, heavy oil, oil sands and shale oil
(conventional oil in shale formations) offer a huge potential in the US. Taken together, these
four unconventional oil resources total more than 3000 billion barrels ofliquid hydrocarbons in
placeS. Even if one were to assume that only 10 percent of this oil could be recovered
economically, it would mean a significant increase in the Nation's domestic energy supply.
The United States is equally well-endowed with unconventional natural gas resources.
Production of natural gas from unconventional rocks, tight sands, coal seams, and organic shales,
has risen sharply during the past two decades. Production of natural gas from shale source rock
in 2012 in the U.S. is roughly 25 times what it was in 2000 6 This rapid growth in shale gas
production is recognized to be the result of the combined application of horizontal drilling and
large-volume hydraulic fracturing technologies. EIA's 2012 Annual Energy Outlook estimates
that 482 trillion cubic feet (Tcf) of unproven but technically recoverable natural gas exists in
eleven major shale gas plays, more than 1.75 times the current total for U.S. dry gas proved
reserves and more than 20 times the 2011 annual marketed dry natural gas production (23 Tcf).
Even more abundant than shale gas is natural gas from methane hydrate. In 2008, the U.S.
Bureau of Ocean Energy Management, Regulation and Enforcement, released a preliminary
assessment of the in-place gas hydrate resource in the Gulf of Mexico. The assessment, which
does not consider whether the resource is technically or economically recoverable, estimated a
mean value of21,400 Tcf of methane-in-place in hydrate form. The assessment also determined
that about 6,700 Tcf of this resource occurs in relatively high concentration accumulations within
sandy sediments; the sort of reservoirs that would be more likely to permit gas flow. To put these
enormous methane hydrate resources in perspective, the DOE EIA reports that the US consumed
a little more than 24 Tcf of gas in 2011.
4 National Coal Council, 2012, Harnessing Coa/'s Carbon Content to Advance the Economy, Environment, and
Energy Security. p. 4
5 NETL, 2011, "Domestic Unconventional Fossil Energy Resource Opportunities and Technology Applications
Report to Congress," September, Table 3-4, p. 15 http://www.netl.doe.gov/lechnologies/oilgas/publicationsIEPreports/20 II-005539-unc-fe-report-congress-final-oct-20 11.pdf
5 NETL, 2011, "Domestie Unconventional Fossil Energy Resource Opportunities and Technology Applications
Report to Congress," September, p. 13 http://www.net1.doe.gov/techno]ogies/oil-gas/publicationslEPreports/2011005539-unc-fe-report-eongress-final-oct-20 II.pdf
5 USGS, 2012, "Isopach and Isoresource Maps for Oil Shale Deposits in Eocene Green River Formation for the
Combined Uinta and Piceance Basins, Utah and Colorado," http://pubs.usgs.gov/sir/2012/50761
5
ETA, Annual Energy Outlook 2012, Table 16, p.58 http://www.eia.gov/forecasts/aeo/pdfI0383(2012).pdf
6 ETA, Annual Energy Outlook 2012 Online Data, Table A-14, http://www.eia.gov/analysis/projectiondata.cfm#annualproj for 2012 estimate of7 .67 Tef per year and "Shale Gas and the Outlook for U.S. Natural Gas
Markets and Global Gas Resources," a presentation by Richard Newell from June 21, 2011
http://www.eia.gov/pressroomlpresentations/newell 06212011.pdf for a 2000 estimate of 0.3 Tef per year
32
Also in 2008, the United States Geological Survey estimated that there is approximately 85 Tef
of undiscovered, technically recoverable natural gas resource within gas hydrates on the North
Slope of Alaska. If methane hydrates can be proven to be technically and economically
producible, this onshore resource located near existing oil and gas production infrastructure is
likely to be the first methane hydrate deposit to be tapped.
Current Status of Research and Technical ChaUenges
Unconventional resources are much larger in volume than are our conventional resource stores.
These resources, however, generally exist in more geologically complex settings or in more
remote or environmentally sensitive areas and require more intensive production methods. The
safe and responsible development of uneonventionaI domestic fossil resources creates jobs and
provides economic benefits.
Federal coordination and collaboration is critical to successfully addressing the environmental
and safety challenges associated with unconventional oil and gas development so that the
benefits highlighted above can be realized. To this end, the President signed an Executive Order
on April 13,2012, creating a new Interagency Working Group to Support Safe and Responsible
DeVelopment of Unconventional Domestic Natural Gas Resources. On the same day DOE, the
Environmental Protection Agency, and the Department of the Interior's U.S. Geological Survey
signed a related Memorandum of Agreement initiating a Multi-Agency Collaboration on
Unconventional Oil and Gas Research. The objective of this collaborative effort is to better
understand and address the potential environmental, health, and safety impacts of shale gas
activities, although the research is also applicable to the development of other unconventional oil
and gas resources. Through the collaboration, a robust Federal R&D plan will be developed,
taking into account high priority recommendations of the Secretary of Energy Advisory Board
(SEAB) Natural Gas Subcommittee. DOE's role in this initiative will focus on priorities
identified by the interagency collaboration in a research plan to be formed within its area of core
research competencies.
The Department is earrying out research directed at quantifYing and understanding the
environmental and safety risks of shale gas and shale oil development, as well improving our
understanding of emerging and developing shale plays, lowering the cost and increasing the
efficiency of technologies for treating hydraulic fracturing flowback water, and optimizing the
recovery of shale gas resource. These efforts are funded through Title IX, Subtitle J, Section 999
of the Energy Policy Act of 2005, the Ultra-Deepwater and Unconventional Natural Gas and
Other Petroleum Resources Program.
DOE's current CO2EOR research portfolio is focused on developing and demonstrating next
generation technologies designed to accelerate the application of C02 EOR in those basins where
it has not yet been applied, and in those reservoirs within areas with existing CO2 EOR that have
not been viewed as economic candidates.
While technology exists for producing heavy oil, there are challenges that still require research,
although given the economic benefits from producing efficiently, industry has incentive to do
most of this research themselves. A key challenge is mitigating the environmental and safety
3
33
risks inherent with heavy oil and oil sands development. Recent DOE efforts have been focused
on heavy oil deposits in the Ugnu Formation on the North Slope; understanding the formation's
geological complexity; and developing water soluble polymers suitable for waterflooding Ugnu
heavy oil reservoirs.
Oil shale was a major topic of public and private research in the 1980s, but interest declined
when other less expensive sources of oil became available. In 2007 and 2009 the Bureau of Land
Management (BLM) leased Federal minerals in Colorado and Utah to private companies to
permit them to conduct oil shale research projects, with the possibility that the projects could be
followed by a commercial leasing program. At least seven companies are utilizing these leases or
other privately held oil shale properties to test both surface retorting of mined shale and in situ
retorting technologies. A key research challeuge associated with oil shale is the need to develop
and evaluate technologies for reducing or controlling the potential for surface and subsurface
water contamination and other environmental impacts.
With regard to methane hydrates, the DOE has successfully finished a pilot production well.
Because of this effort and past DOE efforts, hydrates have moved from a scientific curiosity in
2000 to a known resource today.
DOE Capabilities and Expertise
The DOE's Office of Fossil Energy (FE) with support by the National Energy Technology
Laboratory (NETL) remains well-positioned to address appropriate research challenges related to
envirorunental sustainability and safe development of these unconventional oil and natural gas
resources. FE and NETL have a long history of successfully engaging industry and academia,
forming collaborative partnerships that leverage individual strengths to achieve useful results. FE
and NETL engage with a wide array of experts when formulating research plans, including
Federal Advisory Committees, industry experts, members ofNETL's academic research
consortium, authorities at other National Laboratories, and on-site scientists and engineers.
NETL's 1970- and 1980-era contributions to the fundamental research that resulted in the current
shale gas "revolution" have been reported in the press, but three examples of DOE research
highlight recent contributions made by DOE.
First, as mentioned above, the Ignik Siknmi well on the North Slope of Alaska represents an
unprecedented test of technology to safely extract a steady flow of natural gas from methane
hydrates. DOE partnered with ConocoPhillips and the Japan Oil, Gas and Metals National
Corporation to conduct a test of natural gas extraction from methane hydrate using a unique
production technology, developed through laboratory collaboration between the University of
Bergen, Norway, and ConocoPhillips. Between February 15 and April 10, 2012, the team
injected a mixture of CO 2 and nitrogen into a hydrate bearing zone and demonstrated that this
mixture could promote the production of natural gas. This test was the first-ever field trial of a
methane hydrate production methodology whereby CO2 was exchanged in situ with the methane
molecules within a methane hydrate structure, and the 30 day-long production test was five times
as long as any previous test.
34
Second, in 2010 DOE partnered with Altela Inc. to test the AltelaRain fracturing water
treatment process at a well site in western Pennsylvania. Over a 9-month period, 77 percent of
the produced hydraulic wastewater was successfully treated onsite, resulting in distilled water as
the effluent. Following the DOE-sponsored demonstration project, four AltelaRain modules were
sold and installed at a facility in Williamsport, Pennsylvania, for treating Marcellus shale
wastewater. Building on the success of this application, in 2012 Altela Inc. and its partners are
opening two new wastewater treatment facilities in western Pennsylvania. Each facility is able to
process up to 12,000 barrels of wastewater a day-about 500,000 gallons per facility. The
purified water can then be reused for any number of purposes.
Third, DOE is currently collaborating with Petroleum Recovery Research Center at New Mexico
Tech to develop a nanoparticle-stabilized CO2 foam system that can improve the sweep
efficiency of injected CO 2 in EOR projects. The research team has demonstrated for the first time
that adding a small amount (30-50 parts per million) of surfactant to a silica nanoparticle solution
significantly improves CO2 foam generation and foam stability. Using nanosilica particle
stabilized CO2 foam rather than a straight CO 2 and water mixture, the researchers were able to
recover up to 80 percent of the residual oil that remains after waterflooding. DOE and New
Mexico Tech are continuing to quantify the performance of these foams in core flooding
experiments under a variety of conditions and concentrations, but it is clear that cutting edge
technologies utilizing next-generation materials like nanoparticles can dramatically improve oil
recovery.
These three examples illustrate the range of approaches-international collaboration, field tests
on new technologies with industry partners, laboratory experiments with academic researchersthat are reflected in DOE's unconventional oil and natural extramural gas research program.
Conclusion
The U.S. contains significant hydrocarbon wealth that can be extracted and used to provide
economic benefits for all Americans. Developing our unconventional oil and natural gas
resources in an environmentally sustainable and safe manner will require new technologies.
DOE has demonstrated its ability to engage industry and academia to perform research that can
help catalyze the development and application of these new technologies.
The research challenges are significant. Producing unconventional oil and natural gas requires
that industry expend more energy, use more water, contact larger portions of the reservoir, and
counteract more physical forces than when producing conventional oil and natural gas resources.
It is important that we understand and minimize the unwanted consequences of unconventional
fossil resource development. But as they have in the past, new technologies can provide ways to
reduce or eliminate these bamers.
The Department of Energy is committed to developing, where appropriate, the science and
technology that will allow the Nation to use its abundant fossil energy resources in a way that
balances the energy needs for sustaining a robust economy with continued environmental
responsibility. As we move forward on a multi-agency, collaborative research program with
DOl and EPA, the Office of Fossil Energy will pursue its mission with the same commitment to
excellence and imlOvation.
5
35
Mr. Chairman, this completes my prepared statement. I look forward to addressing any
questions that you or other members of the Subcommittee may have. Thank you.
36
Chairman HARRIS. Thank you, Dr. Cugini.
I now recognize our second witness, Mr. David Martineau, the
Chairman of the Texas Independent Producers and Royalty Owners
Association.
STATEMENT OF MR. DAVID MARTINEAU, CHAIRMAN,
TEXAS INDEPENDENT PRODUCERS AND
ROYALTY OWNERS ASSOCIATION
Mr. MARTINEAU. Thank you very much. Good morning, Mr.

Chairman and members. My name is David Martineau and I am
representing the Texas Independent Producers and Royalty Owners
Association, also known as TIPRO. TIPRO was founded in the East
Texas Field in 1946. Since then, TIPRO has s grown to be a toptier oil and natural gas trade association made up of over 2,500
members statewide. Our membership ranges from small, familyowned businesses to large publicly traded independent producers,
and includes large and small royalty owners, mineral estates, and
trusts. I currently have the pleasure of serving as the Chairman
of the Board of Directors for TIPRO. I am a geologist. I worked for
Pitts Oil Company for 40 years, as we said, and I am truly honored
to be here.
Lately, much has been made of this countrys looming fiscal cliff.
The United States, however, is not only facing a fiscal cliff, but an
energy cliff as well. Domestic independent producers are responsible for approximately 75 percent of the domestic natural gas production, and nearly 50 percent of the domestic oil production. However, threats to the framework that allows independents to maintain and grow their production levels exist in various forms. One,
tax provisions like intangible drilling deductions, IDCs, and depletion allowance are crucial to the survival of the small independent
producers and they are being attacked and mislabeled as big oil
subsidies. Overreaching regulations from the EPA and U.S. Fish
and Wildlife Service with no scientific backing pile additional unnecessary compliance costs onto the oil and natural gas producers.
The Federal Government is attempting to go green and pick winners by focusing federal research and development monies on
unproven, uneconomical and unreliable sources. They will not face
the fact that 85 percent of the energy in the United States comes
from fossil fuels.
What needs to be done to continue to tap the American energy
potential that has been created by the new shale revolution? You
need to, one, understand variations in subsurface properties to
avoid drilling marginal wells and increase recovery efficiency, scientifically characterize risks and inform stakeholders, minimize
surface impacts of unconventional oil and gas operations.
In the past, federal dollars have been spent on researching and
developing improved methods of oil and gas extraction. Much of the
resultant data and techniques combined with the forward thinking
of some brilliant and creative private-sector minds resulted in some
of the biggest energy successes in the countrys history. Let me outline a few specific cases of worthwhile federal research conducted
on oil and gas. In 1976 the U.S. Department of Energy initiated an
eastern shale project to evaluate the gas potential of and enhance
oil production from shales within the Appalachian, Illinois and
37
Michigan basins in the eastern United States. This project showed
that we had enormous amounts of natural gas locked in these domestic shale formations, which are now the massive Marcellus and
Utica shale plays. In 1982, the Federal Government began funding
the research efforts of the Gas Research Institute, an industryformed research and development program founded in 1978, which
has since resulted in increased natural gas viability as a fuel
source. In 1991, George P. Mitchell, the father of the Barnett shale,
with financial help from the Department of Energy, drilled and
completed his first Barnett Shale horizontal well. In 2005, the Energy Policy Act and a research program managed with the Research Partnership to Secure Energy for America called RPSEA
has been a very successful program.
Recognizing the importance of oil and natural gas and investing
federal money in its development should not be a thing of the past.
In fact, never in history has it been more crucial to continue improving and enhancing our ability to recover domestic oil and natural gas. Domestic energy independence can be achieved, and federal research money can play a part.
In the State of Texas alone, since the shale revolution started in
2006, from 2006 to 2011 we have increased annual production of
oil from 347 million barrels to 431 million barrels and natural gas
from 6.3 trillion cubic feet to 7.7. This partially is why our imports
have dropped from 70 percent to 45 percent in that same time period as we head toward energy independence.
Chairman Halls bill 6603 is a good step in the right direction,
and I compliment him for his efforts. Many areas where additional
research could produce significant results are outlined in the bill,
including hydraulic fracturing, development of improved proppants,
water minimization, management, reuse and alternatives, improved modeling of formation, energy efficiency in exploration and
production.
Hydraulic fracturingthe big item. The hydraulic fracturing
process, as it has evolved over the past 50-plus years from vertical
wells to long horizontal wells with multiple fracture treatments,
has introduced many complexities. There is a need for research
focus in this area to increase recovery efficiency. To do so requires
focusing on the subsurface processes involved with fracturing, including modeling of the process, microseismic assessment, emissions, water usage and other research. Successful research will increase the efficiency of the process, significantly reducing the number of well bores required, resulting in a reduction in well sites,
water usage, emissions, traffic, noise, dust and other factors, all
while increasing oil and gas recovery per well. This area of research, the optics of which do not indicate direct environmental impact, can have an overwhelming environmental impact.
Water management is another big issue. According to data collected by the Texas Water Development Board, the volume of water
used in hydraulic fracturing represents less than one percent of all
the water consumed in the State of Texas. However, water management goes hand in hand with hydraulic fracturing, and the industry recognizes that there is still progress that can be made in this
arena. Research and development are needed to address mitigation
of the volumes of freshwater required in hydraulic fracturing; sig-
38
nificant volumes of water produced from oil and gas shale wells
and associated concerns as to its composition when it comes back;
the development of technology to process water, converting the industrys largest waste stream into a new, useful product; and assuring the ability to safely dispose of water in the subsurface by
geologic characterization of potential disposal zones across the
country because they vary from basin to basin.
Understanding the subsurface conditions and types of resource
rock found within unconventional gas formations, in particular oil
and gas shale, require ongoing research. Flow of fluidsgas, oil
and waterthrough the low-permeability formations, particularly
oil and gas shales, is not well understood. By increasing our understanding of subsurface geologic conditions, we can make progress
toward effectively answering questions regarding economic recovery
and environmental safety. Additionally, subsurface research can increase recovery efficiency from many unconventional oil and gas
fields in the U.S., further unlocking minerals yet in place. These
developed fields each have an entire infrastructure already in place
with roads, well bores, metering facilities, marketing.
Thousands of small independents, many of whom are TIPRO
members, do not have the resources to conduct their own research,
yet cumulatively produce a huge portion of domestic oil and natural
gas. This is an area where targeted and carefully disseminated federally funded research efforts can have a significant and immediate
impact on production and the economy, and I urge you to revive
federal research investments into this worthwhile industry.
Often efforts intended to impact major global oil and natural gas
companies end up having a much larger impact on small, familyowned companies, many of whom live and work in your hometowns. These companies are a giant component in generating
American jobs and resources for your state and this country, and
they are worthy of your investment.
Thank you for your time.
[The prepared statement of Mr. Martineau follows:]
39
Energy & Environment Subcommittee

"Tapping America's Energy Potential Through Research and Development."
Testimony ofTIPRO Chairman David Martineau
9:30 a.m. - Friday, November 30,2012
Good morning Mr. Chairman and members. My name is David Martineau,

and I am here representing the Texas Independent Producers and Royalty
Owners Association, also known as TIPRO. TIPRO was founded in the East
Texas Field in 1946. Since then, TIPRO has grown into a top tier oil and
natural gas trade association, made up of over 2,500 members statewide. Our
membership ranges from small, family-owned businesses to the largest
publicly traded independent producers, and includes large and small royalty
owners, mineral estates, and trusts.
I currently have the pleasure of serving as the Chairman of the Board of

Directors for TIPRO. I am a Certified Petroleum Geologist, a licensed Texas
Professional Geoscientist, and I work as exploration manager for Pitts Oil
Company based out of Dallas, Texas. I am truly honored to have the
opportunity to address you all today.
Lately, much has been made of this country's looming "fiscal cliff'. The
United States, however, is not only facing a fiscal cliff, but an "energy cliff'
as well. Domestic independent producers are responsible for approximately
75% of domestic natural gas production, and nearly 50% of domestic oil
production. However, threats to the framework that allows independents to
maintain and grow these production levels exist in various forms:
llPage
40
17

9:30 a.m. - Friday, November 30, 2012
1) Tax provisions like Intangible Drilling Cost deductions (IDC's) and

depletion allowance that are crucial to the survival of small
independent producers are being attacked and mislabeled as "big oil
subsidies".
2) Overreaching regulations from the EPA and U.S. Fish and Wildlife
Service with little to no scientific backing pile additional unnecessary
compliance costs onto the oil and natural gas producers.
3) The federal government is attempting to go green and "pick winners"
by focusing federal research and development monies on unproven,
uneconomical, and unreliable energy sources. They will not face the
fact that eighty-five percent of the energy in the U.S. comes from fossil
fuels.
What needs to be done to continue to tap America's Energy Potential that has
been created by the new Shale Revolution?
1) Understand variations in subsurface properties to avoid drilling marginal
wells and increase recovery efficiency.
2) Scientifically characterize risks and inform stakeholders.
3) Minimize surface impacts of unconventional oil and gas operations.
21Page
41
Tl

In the past, federal dollars have been spent on researching and developing
improved methods of oil and natural gas extraction. Much of the resultant
data and techniques, combined with the forward thinking of some brilliant
and creative private sector minds, resulted in some of the biggest energy
successes in the country's history. A few specific cases of worthwhile federal
research conducted on oil and natural gas development:
)0>
In 1976 - the U.S. Department of Energy initiated the Eastern Gas
Shales Project to evaluate the gas potential of, and to enhance gas
production from shales within the Appalacian, Illinois, and Michigan
basins in the eastern U.S. This project showed that we had enormous
amounts of natural gas locked in these domestic shale formations,
which are now the massive Marcellus and Utica plays.
)0>
In 1982 - the federal government began funding the research efforts of

the Gas Research Institute - an industry-formed research and
development program, founded in 1978, which has since resulted in
increased natural gas viability as a fuel source.
)0>
In 1991 - George P. Mitchell, with financial help from the Department

of Energy, drilled and completed his first Barnett Shale horizontal well.
)0>
In 2005 - Energy Policy Act - is a research program with the Research

Partnership to Secure Energy for America (RPSEA).
Recognizing the importance of oil and natural gas, and investing federal
money in its development, should not be a thing of the past. In fact, never in
31Page
42
Tl

history has it been more crucial to continue improving and enhancing our
ability to recover domestic oil and natural gas. Domestic energy
independence can be achieved, and federal research money can playa part.
In the state of Texas alone, since the Shale Revolution started from 2006 to
2011 we have increased annual production of oil from 347 million bbls to
431 million bbls and natural gas 6.3 trillion MCF to 7.7 trillion MCF. This
partially is why our imports have dropped from 70% to 45% in that same
time period and we are headed toward energy independence.
Chairman Hall's H.R. 6603 is a good step in the right direction and I
compliment him on his efforts. Many areas where additional research could
produce significant results are outlined in the bill, including:
}- hydraulic fracturing
}- development of improved proppants
}- water minimization, management, re-use, and alternatives
}- improved modeling of formations
}- energy efficiency in exploration and production
Hydraulic Fracturing
The hydraulic fracturing process, as it has evolved over the past 50+years
from vertical wells to long horizontal wells with mUltiple fracture treatments
has introduced many complexities.
41Page
43

There is a need for research focus in this area to increase recovery efficiency.
To do so requires research focusing on the subsurface processes involved
with fracturing, including modeling of the process, microseismic assessment,
emissions, water usage and other research.
Successful research will increase the efficiency of the process, significantly

reducing the number of wellbores required, resulting in a reduction in well
sites, water usage, emissions, traffic, noise, dust and other factors, all while
increasing oil and gas recovery per well.
This area of research, the optics of which do not indicate direct

environmental impact, can have an overwhelming environmental impact.
Water Management
According to data collected by the Texas Water Development Board, the

volume of water used in hydraulic fracturing represents less than 1% of all
water consumed in the state of Texas.
However, water management goes hand-in-hand with the hydraulic fracturing
process, and industry recognizes that there is still progress that can be made
in this arena. Research and development are needed to address:
SIPage
44
Tl

1) mitigation of the volumes of fresh water required for hydraulic

fracturing;
2) significant volumes of water produced from oil and gas shale wells and
associated concerns as to its composition;
3) the development of technology to process water - converting the
industry's largest waste stream into a new, useful product; and
4) assuring the ability to safely dispose of water in the subsurface by
geologic characterization of potential disposal zones which vary across
the country - geologic basin to geologic basin.
Understanding the Snhsnrface
The subsurface geologic conditions and types of resource rock found within
unconventional gas formations, in particular oil and gas shale, require
ongoing research.
Flow of fluids (gas, oil, water) through very low
permeability formations (particularly oil and gas shales) is not well

understood. By increasing our understanding of subsurface geologic
conditions, we can make progress toward effectively answering questions
regarding economic recovery and environmental safety. Additionally,
subsurface
research
can
increase
recovery
efficiency
from
many
unconventional oil and gas fields in the U.S., further unlocking minerals yet
in place. These developed fields each have an entire infrastructure already in
place, i.e. roads, wellbores, metering facilities, marketing, etc.
61Page
45
17

Testimony of TlPRO Chairman David Martineau
Thousands of small independents, many of whom are TIPRO members, do

not have the resources to conduct their own research, yet cumulatively
produce a huge portion of domestic oil and natural gas. This is an area where
targeted and carefully disseminated federally-funded research efforts can
have a significant and immediate impact on production and the economy, and
I urge you to revive federal research investments into this worthwhile
industry.
Often efforts intended to impact major, global oil and natural gas companies end
up having a much larger impact on small, family-owned companies, many of
whom live and work in your hometowns. These companies are a giant
component in generating American jobs and resources for your state and this
country, and they are worthy of your investment.
Thank you again for the opportunity to address you today.
7lPage
46
Chairman HARRIS. Thank you very much.
I now recognize our third witness, Dr. Daniel Hill, the Interim
Department Head and Professor and holder of the Noble Chair in
Petroleum Engineering at Texas A&M. Dr. Hill.
STATEMENT OF DR. DANIEL HILL,
INTERIM DEPARTMENT HEAD, PROFESSOR
AND HOLDER OF THE NOBLE CHAIR IN PETROLEUM
ENGINEERING, TEXAS A&M UNIVERSITY
Dr. HILL. Good morning, Chairman and Committee members. I

am Dan Hill. I am the head of the Petroleum Engineering Department at Texas A&M. I have been a faculty member for over 30
years after working in industry for about five years, and throughout my career I have conducted research on methods to improve oil
and gas production. For the past ten years, I have been supervising
research projects funded by the Department of Energy studying
horizontal wells and hydraulic fracturing.
Unconventional oil and gas production has changed the U.S. energy game. In just a few years, applications of advanced technology
have led to the most dramatic economic boost our country has seen
in my lifetime. Production of natural gas and oil from unconventional reservoirs, primarily shale formations, is soaring, daily lessening this countrys dependence on imported oil. Slide 1 is a history
and forecast of the U.S. natural gas supply. In less than ten years,
gas production from shale formations has grown to over 30 percent
of the U.S. supply and continues to grow. This is great news in
every possible way. Natural gas is the cleanest burning fossil fuel,
it yields the least CO2, and it is low cost, thanks to its newfound
abundance in unconventional reservoirs.
Even more dramatic is the rapid increase in domestic oil production from unconventional reservoirs. Slide 2 shows that oil production from the Bakken formation in North Dakota is now close to
500,000 barrels per day. Forecasts are that Bakken production will
reach a peak of 1 to 2 million barrels per day, equivalent to the
peak production from the Alaskan North Slope. Production from
the Eagle Ford formation in South Texas has grown from about
800 barrels per day to almost 300,000 barrels per day in only three
years, as you see in this slide. These are just two examples. There
are many other unconventional reservoirs in other parts of the
country that are also rapidly adding to domestic production. Without question, there is a revolutionary change in U.S. energy supply
underway, solely due to oil and gas production from unconventional
reservoirs.
And how has this happened? This shale production revolution is
a result of major advances in the technologies of horizontal drilling
and hydraulic fracturing, and, in particular, the combination of
these two technologies. These advances have been aided greatly by
a modest level of research funding from the Department of Energy,
funding that supported research primarily at universities, small
businesses and the national laboratories.
Let me give you one example. Beginning in the early 1980s and
through the mid-1990s, the Department of Energy, along with the
Gas Research Institute, supported fundamental research on measuring the sounds made as hydraulic fractures are created. This re-
47
search, led by a team at Sandia National Laboratory, resulted in
a commercial technique for mapping hydraulic fractures that is
now called microseismic monitoring. This technique, which has now
been applied to tens of thousands of fracture treatments, and which
is now itself a multimillion-dollar industry, has allowed engineers
to greatly improve hydraulic fracturing and well completion practices by providing a means to measure the extent of the fractured
region. Slide 4 shows a microseismic map of the area affected by
a multistage fracturing operation. The development of microseismic
monitoring of hydraulic fracture treatments was clearly enabled by
the Department of Energy-funded research that proved its viability.
Is the current domestic energy growth sustainable? The goal of
energy security, and possibly energy independence for the United
States, is no longer just political rhetoric, but is technically attainable. However, it will not be easy, and it will require two things:
further developments in technology, and the trained engineers and
geoscientists needed for continued growth.
On the technology side, although hydraulic fracturing methodologies have obviously been developed to the point that oil and gas are
economically recoverable from very low permeability unconventional reservoirs, there is still a great deal of improvement that can
be made to this technology. Major challenges include using less
freshwater in fracturing and drilling fewer wells to contact the
same amount of reservoir.
The Department of Energy has been funding fundamental research in conjunction with the Research Partnership to Secure Energy for America, or RPSEA, on topics like these for the past several years, and this research is having a visible impact on industry
practices. It is important to continue supporting RPSEA as they
have a proven track record of producing important research results
using a unique public-private partnership model.
Perhaps most important is the role that Department of Energy
funding for unconventional oil and gas research will have on the
training of the engineers and scientists needed to sustain growth
in unconventional oil and gas development. The research funded by
DOE occurs primarily in universities and most of the money ends
up in the pockets of graduate students. The research funding provided to universities through the proposed Department of Energy
research program will help support the graduate students who will
become the future technology leaders of our country.
Thank you.
[The prepared statement of Dr. Hill follows:]
48
Written Testimony
Committee on Science, Space, and Technology
U. S. House of Representatives
November 30, 2012
Good Morning. I am Dan Hill and I am the Head of the Petroleum Engineering
Department at Texas A&M University. I have been a faculty member for over 30
years after working in industry for about 5 years, and throughout my career I have
conducted research on methods to improve oil and gas production. For the past ten
years, I have been supervising research projects funded by the Department of
Energy studying horizontal wells and hydraulic fracturing.
Unconventional oil and gas production has changed the U. S. energy

game.
In just a few years, applications of advanced technology have led to the most
dramatic economic boost our country has seen in my lifetime. Production of
natural gas and oil from unconventional reservoirs, primarily shale formations, is
soaring, daily lessening this country's dependence on imported oil. Slide 1 is a
history and forecast of the U. S. natural gas supply -- in less than 10 years, gas
production from shale formations has grown to over 30% of the U. S. supply, and
continues to grow. This is great news in every possible way
natural gas is the
cleanest burning fossil fuel, it yields the least CO 2, and it is low cost, thanks to its
newfound abundance in unconventional reservoirs.
Even more dramatic is the rapid increase in domestic oil production from
unconventional reservoirs. Slide 2 shows that oil production from the Bakken
formation in North Dakota is now close to 500,000 barrels per day. Forecasts are
49
that Bakken production will reach a peak of 1 - 2 million bpd - equivalent to peak
production from the Alaskan North Slope. Production from the Eagle Ford
fonnation in South Texas has grown from about 800 bpd to almost 300,000 bpd in
only 3 years (Slide 3). These are just two examples. There are many other
unconventional reservoirs in other parts of the country that are also rapidly adding
to domestic production. Without question, there is a revolutionary change in U. S.
energy supply underway, solely due to oil and gas production from unconventional
reservoirs.
How did this happen?

This shale production revolution is a result of major advances in the technologies
of horizontal drilling and hydraulic fracturing, and, in particular, the combination
of these two technologies. These advances have been aided greatly by a modest
level of research funding from the Department of Energy, funding that supported
research primarily at universities, small businesses, and the national laboratories.
Let me give you one example. Beginning in the early 80's and through the mid90's, the Department of Energy, along with the Gas Research Institute, supported
fundamental research on measuring the sounds made as hydraulic fractures are
created. This research, led by a team at Sandia National Laboratory, resulted in a
commercial technique for mapping hydraulic fractures that is now called
micro seismic monitoring. This technique, which has now been applied to tens of
thousands of fracture treatments, and which is now itself a multi-million dollar
industry, has allowed engineers to greatly improve hydraulic fracturing and well
completion practices by providing a means to measure the extent ofthe fractured
region. Slide 4 shows a microseismic map of the area affected by a multi-stage
fracturing operation. The development of micro seismic monitoring of hydraulic
50
fracture treatments was clearly enabled by the Department of Energy funded
research that proved its viability. This basic research was greatly aided by research
funding by GRI and the U.S. Department of Energy.
Is the current domestic energy growth sustainable?

The goal of energy security, and possibly energy independence for the United
States is no longer just political rhetoric, but is technically attainable. We know
where the resources can be found, but we still need technical improvements to be
able to produce much ofthe resource at prices that are beneficial to the public.
However, it will not be easy, and it will require two things
further developments
in technology, and the trained engineers and geoscientists needed for continued
growth. The proposed Department of Energy research funding will be a great help
with both ofthese needs.
On the technology side, although hydraulic fracturing methodologies have
obviously been developed to the point that oil and gas are economically
recoverable from very low permeability unconventional reservoirs, there is still a
great deal of improvement that can be made to this technology. One of the major
challenges is the development of various ways to lessen the environmental impacts
of hydraulic fracturing operations, including using less fresh water in the process,
and drilling fewer wells to contact the same amount of reservoir. Another
challenge is the development of lower cost hydraulic fracturing techniques.
Ironically, the success ofthe industry in rapidly developing huge new volumes of
natural gas from shales has led to a low gas price, which has slowed gas drilling
markedly. Ifthe rapidly increasing oil production has a similar effect,
unconventional oil development will inevitably slow down, unless lower cost
methods can be applied to achieve the same results. The Department of Energy has
51
been funding fundamental research in conjunction with the Research Partnership to
Secure Energy for America (RPSEA) on topics like these for the past several years,
and this research is having a visible impact on industry practices. It is important to
continue supporting RPSEA as they have a proven track record of producing
important research results using a unique public
private partnership model.
Perhaps most important is the role that Department of Energy funding for
unconventional oil and gas research will have on the training of the engineers and
scientists needed to sustain growth in unconventional oil and gas development. The
research funded by DOE occurs primarily in universities and most of the money
ends up in the pockets of graduate students in the form of research assistantships.
The demand for engineers in this field is huge - the COO of a major service
company recently told me that his company alone hired 15,000 new employees in
the U. S. in 2011. That is a lot of jobs, and many of them need to be highly trained
engineers and scientists. Because ofthis booming demand for petroleum engineers
to work in unconventional oil and gas development, we are receiving
unprecedented demand for places in our graduate program. Other universities with
graduate programs in Petroleum Engineering are also receiving numerous
applications for graduate school. To attract and retain high quality graduate
students, a university has to offer financial aid, and this is usually in the form of a
research assistantship funded by an external grant. The research funding provided
to universities through the proposed Department of Energy research program will
help support the graduate students who will become the future technology leaders
of our country.
u.s. dry gas

TcfNear
Projection
History
30
SLIDES
PRESENTED DURING
25
20
15
1990
1995
2000
2005
2010
2015
YEAR
EIA, Annual Energy Outlook 2011
2020
2025
2030
2035
TESTIMONY
52
DR. DANIEL HILLS
10
NORTH
fiG. 1
.55
.50
"0
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.45
.40
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.~
.30
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53
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L __..,.~~~~.
.05
o~--. .--~~~--~--~--~--~
2005
2006
2007
2008
2009
2010
http://www.ogj.com!articles!print!vol-ll0!issue-4!explorationdevelopment!bakken-s-maximum.html
20ll
2012
Texas Eagle Ford Shale

Oil Production
2008 through August 2012
500,000
400,000
300,000
54
>.
e'II
Q
:..
~
:a
200,000
e'II
~
100,000
0
2008
2009
2010
http://www.rrc.state.tx.us/eagleford/EagleFordOiIProduction.pdf
2011
January - August 2012
55
56
Chairman HARRIS. Thank you very much.
I now recognize our fourth and final witness, Mr. Michael
Hagood, the Director of Program Development for Energy and Environment Science and Technology at the Idaho National Laboratory. Mr. Hagood.
STATEMENT OF MR. MICHAEL HAGOOD,
DIRECTOR OF PROGRAM DEVELOPMENT,
ENERGY AND ENVIRONMENT SCIENCE AND TECHNOLOGY,
IDAHO NATIONAL LABORATORY
Mr. HAGOOD. Chairman Harris, Ranking Member Miller and

members of the Subcommittee, thank you for the opportunity to
testify before the House Science, Space, and Technology Subcommittee on Energy and Environment.
I have been asked to provide a statement on aspects of U.S. oil
shale resource development and the importance of associated research development and demonstration. The U.S. oil shale resource
is immense in size with most of the resource located in the States
of Wyoming, Utah and Colorado. Estimates from recent U.S. Geological Survey studies indicate that among these three states, approximately 4 trillion barrels of oil are estimated to be in place
with a significant portion of this resource projected to be recoverable. To put that in perspective, some of those estimates are at 800
billion barrels of oil. To further put that in perspective, given 2011
estimates, the use of oil in the United States is approximately 6.8
billion. It is enormous.
A viable oil shale industry established on the foundation of these
world-class western oil shale resources would help meet U.S. energy demands and reduce dependence on selected imports and their
associated costs as well as reduce the risks associated with potential supply disruptions. On top of that, as already mentioned previously, this also has implications relative to the U.S. economy and
not just directly but also in moving up the value chain associated
with manufacturing.
An oil shale research and demonstration program can contribute
significantly to unlocking some of the richest portions of the western oil shale resource and help achieve this in an environmentally
responsible manner. Government and industry research development and demonstration investment in the Canadian oil sands and
previous U.S. and current U.S. government investment in shale gas
and oil development attest to the value of RD&D in developing unconventional fossil energy resources. In addition, several industry
players are currently conducting R&D demonstration projects as
part of the oil shale research and demonstration leasing program
managed by the Department of Interiors Bureau of Land Management.
While a U.S. oil shale industry will likely be initiated with current technology such as with mining and surface retorts, aggressive
research development and demonstration is also needed to explore
and advance new approaches in innovation. Research development
and demonstration offers to expand technology options, improve
operability and efficiency, mitigate potential environmental impacts, and reduce costs of producing oil shale. The objective of a potential oil shale research development and demonstration program
57
should be to provide solutions that help achieve specific production
and environmental performance goals. Such a program would have
a near-term objective of supporting responsible development of an
oil shale industry but also be sufficiently farsighted to anticipate
and promote multiple next-generation technology advancements.
Given the longevity of this resource, it is something important to
keep in mind. This resource could last 100 or more years.
An oil shale research development and demonstration program
should focus on challenges that exist at both a site operation scale
and those that occur at industry-wide scale including addressing
fuel logistics, integrated energy systems and address potential cumulative environmental effects. Relative to energy systems, these
can include integration of renewable energy or even nuclear energy
with fossil energy development.
Research development and demonstration associated with site
operations should include enhancing production efficiency and environmental performance associated with in situ processing. Addressing environmental performance both at regional and operation
scale needs to address surface and groundwater management, air
quality, greenhouse gas, wildlife and land disturbance challenges.
An effective R&D program should be guided by a strong, strategic
plan developed working with diverse stakeholders and implementing R&D roadmap to ensure that the key research needs are
identified and prioritized. Such a strategy can be built upon work
already completed by U.S. Department of Energy in supporting and
implementing the Energy Policy Act of 2005, Section 369.
Planning should also take advantage of decades of relevant research conducted in association with the Canadian oil sands as
well as what is transpiring recently as part of the Department of
Interiors oil shale leasing program. This effort should also incorporate assets and expertise that have emerged around western oil
shale operations and research including by industry, regional universities, government agencies and laboratories.
The U.S. Department of Energy is a technical integrator that can
bring together needed assets from both within and outside DOE to
deliver an impactful RD&D program and can also act as an independent broker of technical information. DOE and its laboratories
are well qualified to provide this leadership and to deliver a focused, solutions-oriented research program to address key challenges in developing long-term U.S. oil shale industry development.
Chairman and members of the Subcommittee, thank you once
again for the opportunity to share my testimony with you.
[The prepared statement of Mr. Hagood follows:]
58
Testimony of
Michael C. Hagood
Director, Program Development

Energy and Environment Science and Technology
Idaho National Laboratory, Idaho Falls, Idaho
Before the
House Committee on Science, Space and Technology
Subcommittee on Energy and Environment
On
TAPPING AMERICA'S ENERGY POTENTIAL THROUGH RESEARCH AND DEVELOPMENT
ACT OF 2012.
November 30, 2012
59
INTRODUCTION
Chairman Harris, Ranking Member Miller and members of the subcommittee, thank you for the opportunity to
testify before the House Science, Space and Technology Subcommittee on Energy and Environment. Addressing
United States (U.S.) energy security is extremely important and establishing an U.S. oil shale research and
development (R&D) program is strategic, in my view, to securing our energy future.
My name is Michael Hagood. I am the Program Director for Energy and Environment Science and Technology at
Idaho National Laboratory. I am a geologist by training and have worked in the energy and environment sectors
for over 30 years.
My testimony will address the following:
Background on Western U.S. oil shale resources;
How safe and responsible production of oil shale contributes to U.S. security goals;
Identification of selected technical challenges and R&D needs;
Comments on strategy to identify and prioritize R&D;
Comments on draft legislation titled "Tapping America's Energy Potential through Research and
Development Act of 2012."
OIL SHALE RESOURCE BACKGROUND

The United States is currently experiencing an increase in domestic oil and gas production, primarily associated
with its shale gas and tight light oil (shale oil) resources. Production from U.S. oil shale resources, as we Ii, will
likely emerge during the next several years as an important contributor to oil and gas production with the
potential to ramp up into a substantial industry during the next few decades and lasting for most, if not ali, of
this century.
Oil shale is a fine-grained sedimentary source rock, containing organic matter called kerogen, an algae or marine
based material that has not yet been converted into oil. When heated using a pyrolysis (retort) process, oil shale
can be converted to either crude oil or gas. Crude shale oil is then processed in an oil refinery to produce
gasoline, diesel and jet fuels.
Oil shale resources in the United States are immense in size, with most of the resource located in the states of
Wyoming, Utah and Colorado. The richest oil shale was deposited in the north-central part of the Piceance Basin
in Colorado and in the northeast corner of the Uinta Basin, located in parts of northeast Utah and northwest
Colorado (Mercier and Johnson 2012). The Colorado deposits extend from approximately 1,000 feet to as much
as 3,000 feet beneath the surface. Within the oil shale column are geologic formations that vary considerably in
kerogen content and oil concentration. According to U.S. Energy Information Administration (EIA), the entire
column ultimately could produce more than one million barrels oil equivalent per acre during its productive life,
compared to Canada's oil sands deposits which are expected to produce about 100,000 barrels per acre (EIA
2009).
60
Estimates from recent
u.s. Geological Survey studies indicate that between Colorado, Utah and Wyoming,
nearly four trillion barrels of oil are estimated to be in place. Most of this resource is located on federal lands. Of
the estimated four trillion barrels, it is not known how much oil is potentially recoverable and depends on
technical and economic conditions. However, the Rand Corporation (Bartis et aI., 2004) estimates that 30 to 60
percent of the oil shale may be recoverable. This is most significant, given that U.S. usage is approximately 6.8
billion barrels in 2011 (18.83 million barrels per day) and projected to be 7.3 billion barrelsfyr. in 2035 (19.9
million barrels per day) (EIA 2012).
Oil shale development occurs by either in situ (in place) retorting or ex situ (at the surface) retorting. During the
mid-1970s and early 1980s, the petroleum industry focused its efforts primarily on underground mining and
surface retorting of oil shale. Today, mining and surface retorting is planned in areas where oil shale is located
nearer the surface and more economical to mine. However, the higher concentrations of oil shale resources are
located at depths where in situ processes may be more cost effective.
It is more likely that mining with ex situ retort operations will be initiated first by the U.S. oil shale industry and
which will be primarily conducted on state and/or private lands. In situ retort operations within the richer
formations will likely be initiated later. EIA estimates that the earliest date for initiating construction of a
commercial project is 2017 for ex situ process and 2023 probably is the earliest initial date for first commercial
production of in situ processes (EIA 2009). However, the Red Leaf Resources Eco Shale process, which is a
modified surface retort method, may come on line as early as 2015.
Establishing an oil shale industry is heavily dependent upon economics and the price of a barrel of oil. According
to industry representatives (represented by the National Oil Shale Association), it costs somewhere between
$40 and $80 to produce a barrel of oil from shale, depending on the technology used. The price of oil, currently
at -$87 a barrel, has risen ;n the past over $100 a barrel.
HOW DOES SAFE AND RESPONSIBLE PRODUCTION OF OIL SHALE CONTRIBUTE

TO U.S. SECURITY GOALS
A viable oil shale industry would help meet U.S. energy demands and reduce dependence on selected imports
and associated costs, as well as reduce the risks associated with potential supply disruptions. New jobs directly
related to oil and gas industry and the domestic production supply chain would arise from this industry,
including those potentially associated with value-added industries, not yet identified. Development of an oil
shale industry will also result in increases in tax and royalty payments to federal and state government for oil
production on their lands and contribute to the U.S. gross domestic product (Unconventional Fuels Task Force
2004,2006; GAO 2012).
Currently, it is not known what production rates may be achieved by an oil shale industry, however DOE
provided a vision of a commercial oil shale projects that would range in size from 10,000 to 50,000 barrels per
day for surface retorts to as much as 300,000 barrels per day for full-scale in situ projects. For the DOE study, a
reasonable development scenario envisioned cumulative production of two to four million barrels per day by
2020 to 2030. The time to market, however, depends on the level of R&D support and other factors.
61
SELECTED TECHNICAL CHALLENGES AND ASSOCIATED RESEARCH AND
DEVELOPMENT NEEDS PERTINENT TO CREATING AND SUSTAINING A U.S. OIL
SHALE INDUSTRY
While an U.S. oil shale industry will likely be initiated on a small portion of the U.S. oil shale reserves using
current technologies, an aggressive R&D program is required to help tap the largest and most valuable portions
of the U.S. reserves. Specifically, R&D is required for in situ processes to explore and advance new approaches
and innovative concepts. More research promises to expand technology options, improve operability and
efficiency, mitigate potential environmental impacts and reduce costs of producing oil shale (DOE, 2004).
Advancement of novel concepts and new approaches requires significant investment in long-term, high-risk R&D
to reach proof-of-concept stages of development. Similarly, applied R&D is needed to develop and prove
technology at bench or field scale prior to demonstration at a commercial scale (DOE, 2004).
Research and Development has already played a strategic role in the successful development of unconventional
fossil energy resources, such the Canadian oil sands, U.S. shale gas and shale oil (light tight oil, e.g., Bakken
Formation). All of these R&D programs took many years to bring new products to market. Relative to oil shale, a
summary profile of oil shale technology and R&D can be found in various reports (U.S. DOE 2007, 2011;
Unconventional Fuels Task Force, 2007). Research emanating from Canadian oil sands development is also an
invaluable and relevant source of information, even though focused on a different type of hydrocarbon
resource.
Ex situ retort of oil shale has already been deployed commercially, however most of the richer Western oil shale
resources are located at depths requiring implementing in situ retort and recovery processes. Although the
technical feasibility of in situ retorting has been proved, considerable technological development and testing are
still needed. Of particular note, several industry players are conducting demonstration projects as part of the Oil
Shale Research Development and Demonstration Leasing Program managed by the Department of the Interior's
Bureau of land Management (Crawford et ai, 2012). Particular challenges include improving the economics of
these operations by simultaneously attaining greater production efficiencies and mitigating environmental
impacts. A number of associated research topics need to be addressed in a federal oil shale R&D program,
induding increasing the energy return on investment, fracture mechanics and heat transfer for enhancing
recovery, materials performance in high-temperature subsurface environments, real-time subsurface process
monitoring, water use reduction and post-retort subsurface environmental impact mitigation. Modeling and
simulation can assist in addressing many of these topics but computer simulations must be supported by
laboratory testing and field validation. In addition, there is significant opportunity for developing novel
technology to support "smarter," environmentally-friendly oil shale development.
A number of challenges and opportunities also exist for an emergent oil shale industry as a whole. Collectively
there are likely several pathways to develop Western oil shale, which goes beyond addressing individual site
operations. Accordingly, it is worthy to consider conducting an oil shale industry fuels logistics analysis which
would help better understand options for developing a 'power, refining and delivery infrastructure, within the
context as well of a marketplace. Given the size and longevity of the resource, there is also opportunity to
investigate application of hybrid energy systems approaches, including integrating renewable and/or nuclear
62
energy into oil shale development schemes for achieving greater carbon efficiency and reducing environmental
impact. Understanding the development of a U.S. oil shale industry within the context of a greater bi-national
regional energy corridor is also essential to enhancing long-term U.S. energy security and the economy. In
addition, there will be cumulative environmental and socioeconomic effects in the region that need to be better
understood and addressed, including within the context of competing needs (i.e., for agriculture, municipalities,
industry, etc.).
Associated with both site operations and development of a larger oil shale industry is a need to ensure that oil
shale resources are developed using environmentally suitable approaches. Increasingly, research is playing a role
in better understanding the interdependencies between energy development and the environment and the
development of innovations that mitigate environmental impacts. This requires significant investments in
research to enhance environmental performance associated with water, air quality, wildlife, land (including land
reclamation) and greenhouse gases. Water management, as an example, is critical in the arid west and there are
concerns that adequate quantities are available to support an oil shale industry and whether there will be
impacts on water quality and use elsewhere.
COMMENTS ON DRAFT LEGISLATION TITLED "TAPPING AMERICA'S ENERGY

POTENTIAL THROUGH RESEARCH AND DEVELOPMENT ACT OF 2012."
A federal oil shale R&D program is critical to establishing a viable U.S. oil shale industry, focused on long-term
responsible and safe oil shale production. Given the evidence from R&D investments made in similar settings,
such as the Canadian oil sands, an oil shale program would provide a high return on investment. A wellorganized federal R&D program can provide the backbone for coordinating research across academia, industry,
and state and federal laboratories.
The objective of such an oil shale R&D program should be to provide solutions that help achieve specific
production and environmental performance goals. It should have a strong strategic plan and a road map to
better focus and prioritize R&D investments. Prescribing specific investment R&D directions without sufficient
planning can be risky and potentially lead to disconnected R&D efforts that do not effectively achieve the
desired end state. A Significant body of work produced by DOE and the Task Force on Strategic Unconventional
Fuels already exists upon which R&D planning can be built (see references) including a 2008 strategic plan for
implementing portions of the Task Force's recommendations (Task Force's 2007 program plan), prepared by an
Ad-Hoc group of approximately 35 representatives from private industry, academia, community representatives,
and local, state and Federal agencies (DOE, 2008).
Stakeholder engagement in an R&D program is very important. Tapping diverse views and champions are
essential for innovations in technology. A R&D network promoting "shared research" will improve technology
development and have greater impact on technology development than isolated R&D.
The R&D program must consist of investments in both basic and applied research, giVen the nature of the
industry and its longevity. In addition, a strong field demonstration aspect should be required to better facilitate
technology deployment. Such a program would provide a greater understanding of the potential benefits and
63
impacts of oil shale development, while preparing the ground work for, and facilitating, commercialization of
America's strategic oil shale resources.
The
u.s. Department of Energy and its laboratories are well qualified to provide leadership to deliver a focused,
solutions oriented R&D program to address key challenges in realizing a competitive U.S. oil shale industry. DOE
is a technical integrator that can bring together needed assets and expertise from both within and outside DOE,
including universities and industry, to provide a high-quality R&D program, and as well, act as a needed honest
broker of technical information.
Chairmen and members of the Subcommittee, thank you once again for the opportunity to testify.
REFERENCES
Bartis, J.T., T. LaTourrette, L. Dixon, DJ. Peterson, G. Cecchine, 2005. "Oil Shale Development in the United
States - Prospects and Policy Issues." Rand Corporation - Prepared for the National Energy Technology
Laboratory, U.S. DOE.
Crawford, P.M., C. Dean, J. Stone, J. Killen, 2012. "Assessment of Plans and Progress on US Bureau of land
Management Oil Shale RD&D Leases in the United States."
http://www.unconventionalfuels.orq/otherreports.html.
General Accounting Office, 10 May 2012. "Opportunities and Challenges of Oil Shale Development: GAO-12740T." General Accounting Office.
General Accounting Office, 2012. "Unconventional Oil and Gas Production: Opportunities and Challenges of Oil
Shale Development GAO-12-7407." General Accounting Office.
General Accounting Office, 29 Oct 2010. "Energy-Water Nexus: A Better and Coordinated Understanding of
Water Resources Could Help Mitigate the Impacts of Potential Oil Shale Development GAO-1l-35."
General Accounting Office.
King, C.W., and M.E. Webber, 2008. "Water Intensity of Transportation," Environmental Science & Technology,
Vol. 42, No. 21, pp. 7866-7872 at http://aubs.acs.orq/doi/abs/10.1021/ec800367m.
Mercier, T.J., and Johnson, R.C., 2012. "Isopach and Isoresource Maps for Oil Shale Deposits in the Eocene Green
River Formation for the Combined Uinta and Piceance BaSins, Utah and Colorado." U.S. Geological
Survey Scientific Investigations Report 2012-5076, 85 p., 1 pI.

National Oil Shale Association, May 2010. "Oil Shale Update."
http://www.oilshaleassac.orq/documents!FinoIUpdateMay2010.pdf.
Task Force on Strategic Unconventional Fuels, December 2009. "Annual Report."
64
Task Force on Strategic Unconventional Fuels, September 2006. "Development of America's Strategic
Unconventional Fuels Resources." Initial Report to the President and the Congress of the United StatesPrepared in Response to Section 369(h) (5)(A) of the Energy Policy Act of 2005 (P.L. 109-58).
Task Force on Strategic Unconventional Fuels, September 2006. "Development of America's
Strategic
Unconventional Fuels Resources." Initial Report to the President and the Congress of the United States.
Task Force Strategy and Program Plan, 2007. "America's Strategic Unconventional Fuels." Volume 1Preparation Strategy, Plan and Recommendations, Volume 1/- Resource-Specific and Cross-cut Plans,
Volume 111- Resource and Technology Profiles."
U.S. Department of Energy Office of Naval Petroleum and Oil Shale Reserves, December 2004. "America's Oil
Shale - A Roadmap for Federal Decision Making - Sustainable Development of Oil Shale Resources in the
United States."
U.S. Department of Energy Office of Petroleum Reserves Office of Reserve lands Management, Fourth Edition,
September 2011. "Secure Fuels from Domestic Resources: The Continuing Evolution of America's Oil
Shale and Tar Sands Industries Profiles of Companies Engaged in Domestic Oil Shale and Tar Sands
Resource and Technology Development: 5th Edition."
U.S. DOE Office of Naval Petroleum and Oil Shale Reserves, November 2008. "Strategic Plan - Unconventional
Fuels Development within the Western Energy Corridor." U.S. Department of Energy, Ad Hoc
Unconventional Fuels Working Group: U.S. Department of Energy.
U.S. DOE Office of Petroleum Reserves, September 2010. "Oil Shale Research in the United States: Profiles of Oil
Shale Research and Development Activities in Universities, National laboratories, and Public Agencies."
U.S. Department of Energy Office of Reserve lands Management. Second Edition,
U.S. DOE, 2008. Strategic Plan - Unconventional Fuels Development within the Western Energy Corridorproduced by the Ad Hoc Unconventional Fuels Development Working Group.
U.s. Energy Information Administration Annual Energy Outlook Analysis. AEO, 2009. "Expectations for Oil Shale
Production."
U.s. Geological Survey Oil Shale Assessment Team, 2011. "Oil Shale Resources of the Eocene Green River
Formation, Greater Green River BaSin, Wyoming, Colorado, and Utah." U.S. Geological Survey Digital
Data Series DDS-69-DD, 6 chapters, pages variable.
U.S. Geological Survey, June 2011. "Assessment of In-Place Oil Shale Resources of the Green River Formation,
Greater river Basin in Wyoming, Colorado and Utah." United States Geological Survey, June 2011.
65
SUMMARY
The U.S. oil shale resource is immense in size with most of the resource located in the states of Wyoming, Utah
and Colorado. Estimates from recent U.S. Geological Survey studies indicate that among these three states,
nearly four trillion barrels of oil are estimated to be in place, with a significant portion of this resource projected
to be technically and economically recoverable. A viable oil shale industry would help meet U.S. energy demands
and reduce dependence on selected imports and associated costs, as well as reduce the risks associated with
potential supply disruptions.
An oil shale R&D program can contribute significantly to unlocking some of the richest portions ofthe western
oil shale resource and help achieve this in an environmentally responsible manner. Government and industry
R&D investment in the Canadian oil sands and previous U.S. government investment in shale gas and oil
development attest to the value of R&D in developing unconventional fossil energy resources.
While an U.s. oil shale industry will likely be initiated with current technology, aggressive R&D is also needed to
explore and advance new approaches and innovation. R&D offers to expand technology options, improve
operability and efficiency, mitigate potential environmental impacts and reduce costs of producing oil shale. The
objective of an oil shale R&D program should be to provide solutions that help achieve specific production and
environmental performance goals. Such a program would have a near-term objective of supporting responsible
development of an oil shale industry, but also be sufficiently far-sighted to anticipate and promote mUltiple
"next generation" technology advancements.
An oil shale R&D program should focus on challenges that exist at both a site operations scale and those that
occur at industry-wide scale, including addressing fuel logistics, integrated energy systems approaches
(including renewable and nuclear energy options), and address potential cumulative environmental effects. R&D
associated with site operations should include enhancing production efficiency and environmental performance
associated with in situ processing. Addressing environmental performance, both at regional and operations scale
needs to address surface and groundwater management, air quality, greenhouse gases, wildlife and land
disturbance challenges.
An effective R&D program should be guided by a strong strategic plan working with diverse stakeholders and
implementing a R&D road map to ensure that the key research needs are identified and prioritized. Such a
strategy can be built upon work already completed by the Unconventional Fuels Task Force
(www.unconventionalfuels.org) and DOE in support of implementing Energy Policy Act 2005, Section 369.
Planning should also take advantage of decades of relevant research conducted in association with the Canadian
oil sands. This effort should also incorporate assets and expertise that have emerged around western oil shale
operations and research, including regional universities, government agencies and laboratories.
The U.S. Department of Energy is a technical integrator that can bring together needed assets from both within
and outside DOE to deliver an impactful R&D program and can also act as an honest broker of technical
information. DOE is well qualified to provide leadership and to deliver a focused, solutions oriented, R&D
program to address key challenges in developing a long-term u.s. oil shale industry.
66
Chairman HARRIS. Thank you very much, and I thank the panel
for their testimony, reminding members that Committee rules limit
questioning for five minutes. The Chair will at this point open the
round of questions, and I recognize myself for five minutes first.
Mr. Hagood, thank you very much for that testimony. Let me get
those figures straight. There are estimates that of those 4 trillion
barrels, 800 billion potentially recoverable, and if I do my math
right, that is over 120 years at our current usage, and remember
that our current usage of oil is actually declining over the past few
years, so we have potentially over 120 years in that oil shale by
those numbers?
Mr. HAGOOD. Yes.
Chairman HARRIS. That is what I thought. And who has the largest oil shale deposits in the world? It is us, and is it some other
country also?
Mr. HAGOOD. Well, the United States has
Chairman HARRIS. The United States, so let me see, I think I get
it. Okay. So it is something we probably ought to be investing in.
Dr. Hill, do you realize that of theoh, my gosh, let me see, $15
billion or so DOE budget, that only $5 million is spent on unconventional, none of it on oil shale or shale oil and gas?
Dr. HILL. I am well aware.
Chairman HARRIS. You realize that, right?
Dr. HILL. Yes.
Chairman HARRIS. Okay. I know you mentioned the importance
of getting this money to graduates, but there is no money going to
graduate students who are looking at oil shale from DOE, I anticipate.
Mr. Martineau, let me just run that one more time because even
in the current discussion, we are hearing about Big Oil and all the
rest of that. The intangible drilling cost deduction and depletion allowance doesnt go to Exxon, does it? The vast, vast, vast majority.
I mean, the vast majority goes to small owners and drillers?
Mr. MARTINEAU. Yes and no. Exxon and major oil companies get
to deduct 70 percent of their intangibles, but when they come back
into this country and start drilling again, it is very important.
Chairman HARRIS. That they continue to do it because they are
drilling here, not making money overseas.
Mr. MARTINEAU. Amortized over five years.
Chairman HARRIS. So when we are talking about that, that is
about domestic manufacturing. That is what I thought, and I
thought we all support domestic manufacturing. You mentioned
thatit is interesting because you kind of mentioned the importance of investing in these technologies, and there are two ways
you can invest. The government can invest in order to find ways
to condemn the technology, or they can invest to find ways to further develop new technologies, and my fear is that some of the investment being done over at EPA, and I am going to get Dr. Cugini
next about DOE, may be the former, thats what we want to do,
is we want to do research to condemn current technologies, not realizing the future is to find the next technological breakthrough,
and it would seem to me that thatand I am just asking if you
share that opinion. It seems that that is the best way we should
be spending our money is actually to find out how to increase pro-
67
duction through new technology, not finding problems with current
production in order to just condemn it. I mean, that has no use if
you are not going to also find ways to improve it. Is that correct?
Mr. MARTINEAU. I think you can improve the technologies that
we currently have, and
Chairman HARRIS. And that would do both things at once, right?
It would increase production and help the environment.
Mr. MARTINEAU. Exactly.
Chairman HARRIS. Right, and I am still trying to figure out how
drilling those wells at Pavilion by the EPA does the latter and not
the former. I am still trying to figure it out. It is just to condemn
current technology. It is incredible to me.
Dr. Cugini, let me end up with you in my last couple minutes
because, you know, this is about getting money into the Department of Energy to do some things. Is that really true, that there
is no money spent right now on oil shale R&D? I mean, that was
the testimony before the Committee this year.
Dr. CUGINI. Well, I think there has been some historical
Chairman HARRIS. Not historicalthis year.
Dr. CUGINI. But those projects are still underway, so at the University of Utah, we have some small amount of work going on
and
Chairman HARRIS. And how much is a small amount out of the
$15 billion DOE budget?
Dr. CUGINI. I dont have those numbers
Chairman HARRIS. Can you get that number back to me? And I
will ask the Committee to make sure we make that request of the
doctor. Because I suspect it is really small, which is just amazing
to me because we have testimony, we are looking at 120 years of
oil, and I am not even counting the things that is in shale oil and
gas. We are just talking about this one resource, 120 years. We are
in the midst ofthe whole world would like to buy our oil and we
are sitting on it, and you are telling me there is one little project
at Utah, and that is it for oil shale.
Dr. CUGINI. Well, I think there is also some work that we do with
Bureau of Land
Chairman HARRIS. Well, now, let me ask you
Dr. CUGINI. Management that you pointed out during your
Chairman HARRIS. Let us pretend we start with a clean slate.
What are some of the things we should be doing in order to move
the development of oil shale along? What are some of the things
the Department of Energy you think could do within the realm of
possibility?
Dr. CUGINI. Well, obviously several of the projects would involve
improving the efficiency of the process, looking at things like better
water management and those type of technologies. I think those
are the two key components of an oil shale program. The energy
requirements and water requirements are such that it makes it difficult to extra the oil economically so I think a program that was
addressing those two issues would allow us to look further at oil
shale.
Chairman HARRIS. And do you think that Chairman Halls bill
moves us in that direction, or can?
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Dr. CUGINI. I think added resources would have the opportunity
to do it. I think that is the way I would say it.
Chairman HARRIS. Okay. Thank you very much for answering.
I now recognize the ranking member, Mr. Miller, for five minutes.
Mr. MILLER. Thank you, Mr. Chairman. I know what Emerson
said about a foolish consistency but I am still struck by this discussion.
Dr. Cugini?
Dr. CUGINI. Yes.
Mr. MILLER. You said in your testimony that, not oil shale, but
shale oil technology was a resultthat we have now was a result
of research in the 1970s and the 1980s, Federal Government research but closely working with industry in that. Is that correct?
Dr. CUGINI. That is correct.
Mr. MILLER. Okay. And howwe have heard the phrase picking
winners and losers, and the various technologies are in competition with each other as the coal industry has learned from the decline in natural gas prices, and I think most of the assumptions
about oil shale is that the reason it is not commercially practical,
although it has been researched within an inch of its life, it is not
commercially viable at current prices. But how are we not picking
a winner? How are we not picking winners and losers in the 1970s
and the 1980s?
Dr. CUGINI. Well, I think in the 1970s and 1980s, the research
was developedwas focused on developing technology, base sets of
technology. So you heard testimony today about some of the work
that resulted in seismic activity allowing us to draw seismic maps.
It was somewhat fundamental in nature. We were also able to start
asking industry to start looking at these technologies, providing information about the resource maps and other types of information
related to resources, and working with industry, industry picked up
a lot of the balls in looking at applying, as we found out, hydraulic
fracturing and other types of technologies.
Mr. MILLER. And by the way, I support energy research, and I
support energy research into any available form of energy. In the
1970s and 1980s, I think we were spending ten percent of all federal research funding on energy research, and I think now it is 3,
and that seems foolish to me. I think we should be spending more
on energy research, and it should include energy into alternative
fossil fuels or unconventional fossil fuels. So the research in the
1970s and 1980s was for a fairly early stage that might or might
not work. Is that correct? Is that why the industry wasnt just
doing it by themselves without needing government to be part of
that?
Dr. CUGINI. I think there were a lot of factors in play. I mean,
part of it was the early stage of the resourcesthe research. It was
also a lack of information relative to whether that resource was actively there and actively extractable. So part of the DOEs budget
in research at that time was characterizingworking with USGS
and others to characterize the available resource. So there were a
combination of interests. I think one of them may have been the
early stage of the technology development.
69
Mr. MILLER. I am struck by the arguments, the fairly dismissive
arguments about alternative energy sources as being unreliable,
uncertain, and the fossil fuel research that we have heard about
today is described as a sure thing, a slam dunk. Mr. Martineau,
that was your testimony, and you are nodding your head now, that
yes, that is right. But if it is a slam dunk, if we know it is going
to be profitable, why do we need to be funding it? Why is that not
an ordinary business expense for the industry that will produce it?
It seems like the more logical funding should be for early-stage research for technologies that might or might not prove to be commercially viable.
Dr. Cugini, could you walk me through that? Could you explain
that to me?
Dr. CUGINI. Well, there still is somewhat risk factors associated
with some of the technologies, so take for example exploiting the
natural gas resource from shale development. Right now, there is
incentive to exploit that resource because at about 20 percent extraction of the gas, which current technologies, give or take, give
us, it is economically recoverable. But there is potential to access
quite a bit more of that gas through novel techniques. There really
isnt any incentive, I think, in industry or capital in the industry
to go after improved extraction technologies. So that might be an
example that I think addresses your question.
Mr. MILLER. Mr. Martineau, if this research is as sure as you say
it is to produce recoverable energy, why is this notwhy is our
funding for this research not paying for just an ordinary business
expense for the industry? Why is it not a direct, just subsidy?
Mr. MARTINEAU. A subsidywell, of course, I have been an independent oil and gas operator, which I have been a geologist for 52
years now, and I just look back at what has happened in the shale
itself. We used to drill wells all the time through shales, non-commercial, low permeability nanodarcy type thing, and you couldnt
do it, and until they started the Barnett shale program in 1981,
when George Mitchell drilled the first well, attempting to develop
the gas, and you think how many years it took before the shale
took over. Now we have a shale revolution all over the whole
United States, but if it hadnt been for some of the research work,
and I was involved somewhat when the first horizontal well that
I mentioned here before that George Mitchell drilled, was funded
somewhat by the Department of Energy to see if a horizontal
wellat that time gas prices were so low, it didnt make sense to
do it, and as the gas prices came up, we started doing it. But some
of the research that us independentsbecause we dont have access
to research. We strictly drill well, drill producers, dry holes and
commercial wells, and so I think the research that has been done
that I have been involved with through my years in the business
has been a real asset for the small independents, because we dont
have the research teams to come up with the different type of technologies that were advanced in fracking itself. Fracking has been
around for 50 years. We have been fracking wells forever, but the
technology of hooking a horizontal well with a frack joband they
used to frack them all with water in one stageor no, gel, and
then they switched to water, increased the production tremendously. The horizontal legs now, it used to be 2,000, 3,000 feet.
70
Now it is 6,000 to 7,000 feet but 50 fracks in it. In other words,
the technologies and the mapping that he did showing where the
frack job goes is really critical because nobody knew before. The
microseismic work that we have done and the technology, that was
backed by funded research from the Department of Energy and different people how to dohow do you trace where these frack jobs
go.
The big issue, of course, is frack water contaminating the
freshwaters, and that mapping that he showed, it only goes 150,
200 feet away from that well before. They go up into the freshwater
zone. It doesnt happen. There has never been a well yet that has
been contaminated by a frack job from the freshwater zones. They
have been contaminated all right, but it is because of poor casing,
cementing or the lack of integrity in the pipe, which has caused the
water, but, you know, they have been opening water wells in homes
forever and you could light a match to it and, you know, it is not
the first time. Since fracking came around, everybody says, oh,
they are caustic. That is not true. That has been happening forever
in this United States.
Chairman HARRIS. Thank you very much, and the gentleman
yields back his time.
Chairman Hall is recognized for five minutes.
Chairman HALL. I thank you, Mr. Chairman, and I think Dr.
Cugini and Mr. Martineau and others of you there could also point
out that independents seek and search for and majors buy it, and
independents are the ones that take the chance and need some
help, and years ago I think that the names of Frank Pitts and
Shelby Pitts are well known to this Committee. They have been before this Committee and before Energy and Commerce many times,
and thank you. It is a product of theirs for being here.
Mr. Martineau, I want to thank you also for impact on unconventional energy production in Texas. As you know, states currently
have the authority to regulate hydraulic fracturing, though I am
concerned that the EPAs activist regulatory agency and disregard
for scientific methods, not taking a scientific approach to it, in their
attempts to usurp this authority. How does the responsible regulatory agency for oil and gas production in Texasthat is the Railroad Commissionperform regulation and oversight of TIPRO
members and their companies?
Mr. MARTINEAU. Well, the Texas Railroad Commission has been
overseeing the development of oil and gas for many, many years,
and they have got technical staff of engineers and geologists just
like the oil companies do, and whenever a frack job is performed
of course, now with the new frack focus, you have to report exactly
what has been pumped into the particular well and that information was somewhat started kind of by the Railroad Commission because everybody kept saying well, we dont know what is going into
the well. But the Railroad Commission oversees all the development when you are drilling a well, how much surface casing you
have to set to protect the freshwaters and how much cement you
actually have and you have to report all of this information to the
Railroad Commission. So they have been overseeing the operations
of oil and gas in Texas forever, and had the EPA come inand I
testifiedwell, I didnt testify. I went over to a hearing where the
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EPA was talking about trying to control fracking, and every state,
every rock is a little bit different. You frack them all different. You
cant come up with one rule that covers the entire United States.
Each state has different types of rock and therefore each State has
its own regulatory agency and therefore you dont need to have one
massive rule by people who have never drilled a well in their life
trying to tell you how to do it.
Chairman HALL. Well, Mr. Miller asked some questions, logical
questions about why cant the success pay for the search, you
know. It is probably true that the independents do take all the
chances and the majors buy them after they are successful. That
is the reason that they need some support as they go.
Before I yield back my time, I want to thank Mr. Miller for his
service to this Committee. He has been a very valuable member.
He goes back to my state, all my people came from North Carolina,
to give his services there, and I want to wish him well there.
I yield back my time.
Chairman HARRIS. Thank you very much, Mr. Chairman, and the
gentleman from California, Mr. McNerney, is recognized for five
minutes.
Mr. MCNERNEY. Thank you, Mr. Chairman, and I thank the panelists for coming today and testifying. Most of my colleagues, I believe would be in favor in providing research dollars for development of energy resources but I just challenge my Republican colleagues to be as receptive toward spending dollars on clean energy
as they are on fossil fuel energy. For example, the wind energy production tax credit is about to expire this year. That will throw
about 40,000 people out of work, and this is an industry that has
been developed in this country by American research dollars. These
jobs are going to go overseas and they are going to be taken over
this industry is going to be taken over by our competitors. So I
think it is important that we keep that in mind as we move forward.
Now, I think everyone on this panel agrees that the unconventional resources are massive, that there is a massive amount of energy and fossil fuels there. But what is the energy balance of the
unconventional resources versus the conventional resources? Pick
any one of them, tar sands or shale oil. What is the energy out
versus the energy in compared to what it looked like when the oil
was first being developed back in the early 1900s? Does anyone
want to take a shot? Dr. Hill, do you want to take a stab at that?
Dr. HILL. All right. Well, certainly some energy is expended in
creating these wells, and you could pretty much figure it out from
the economics, you know, compare the value of the oil produced
compared with the cost to create and complete the wells, and a typical good oil-producing well now from a shale formation, you know,
that ratio might be two or three to one. In other words, two or
three timesthe value of the crude oil produced is two or three
times the cost of the well. So that is a rough ratio.
Mr. MCNERNEY. I mean, that sounds about right. Back in the
spindle oil well days, they were talking about 90 or so to one, so
we are seeing a much bigger investment of energy into these wells
than we ever saw before, and those of us that are concerned about
CO2 and global warming, and I am one of those people, we are
72
going to be putting two to three times as much carbon into the atmosphere per unit of energy delivered. So this is a very big concern
for myself, for a lot of people across this country about what impact
it is going to have on our global environment. And I think that is
something we need to consider as we move forward and the research dollars that are spent in this program to understand that
impact and to find ways to mitigate that impact if carbon sequestration is part of the solution.
Now, another question I have is, will the so-called energy independence that we are aiming at result in any lower cost for American consumers as opposed to the cost that it will reduce for foreign
consumers? So what I am getting at is that, yes, this is going to
produce a lot more energy, a lot more oil but this is fungible. This
is an international market. Those products are going to go overseas
just like they are to this country. It is not going to help our consumers any more than it is going to help any other consumer in
the world. So to say that this is benefiting American consumers
more than foreign consumers I think is not necessarily true. It is
not necessarily a true statement. Does anyone care to respond? Mr.
Martineau? Go ahead.
Mr. MARTINEAU. You know, one thing earlier that you said about
the other resources, and I think of biofuels in particular, because
it is kind of interesting, you hear a lot of conversation, you know,
biofuels are, what, ten percent of the gasoline you have do now,
and the cost of the biofuels, which is this third-party energy, green
energy-type thing, comes from the corn that is grown, and they
were talking about how much water it takes to keep that corn
growing, which is the water that we are now talking about how do
we use it, we are using up all the water in fracking. A lot of it is
being used to grow the corn. The corn now goes into biofuels and
doesnt go to the food and so our food prices have gone up. And so,
you know, these are the third-party-type green energy things that
I think are very expensive, that people dont put the real dollar to
it what that ten percent cost is unbelievable
Mr. MCNERNEY. I agree. There needs to be a fair look at all these
sources, and I am not going to single out fossil fuels because cornbased ethanol has its problems, no question about it.
The last question I have is regarding to the industrys record for
hiring veterans of this country. The wind industry has the best
record of any industry of hiring veterans because of the transfer of
skills. What is the record of the fossil fuel industry in this area?
Mr. MARTINEAU. I am not real sure, although I heard, and I am
not sure which group, they are doing a program, I think it is HoustonI will have to find outwhere they are bringing in all of the
veterans because the job increases that have increased in the
United States recently because of the shale revolution is unbelievable, and they are putting a program together, and I can find out
the name of it but it is to ask veterans to come in, study how to
be a roughneck, how to be a roustabout, you know, either that or
can they go to college and become an engineer or a geologist. So
there are programs that are using veterans because we cant find
people to go to work in all these shale plays that are going on right
now, and I think your group in the wind industry, they can go to
73
work in the oil industry. They are not going to have to go overseas.
They can go right to work in the oil and gas industry.
Mr. MCNERNEY. Mr. Chairman, I would ask that you consider
that a part of your bill, Mr. Hall, to give provisions, special provisions for training and hiring veterans if they are going to be used
in this research.
Chairman HARRIS. Thank you very much, Mr. McNerney, and I
now recognize the gentleman from California, Mr. Rohrabacher, for
five minutes.
Mr. ROHRABACHER. Well, let me just note that when people in
this country are forced to use energy resources that are more expensive than the alternatives that they could use otherwise because of some harebrained environmental theory that whatever
that harebrained theory is, that that expense, which is usually hidden from the public, goes right out of the pool of money that we
have to provide good jobs for our veterans and everybody else. So
if wind costs five times as much to produce the same amount of
electricity as natural gas, that is how much money less we have to
provide good jobs for veterans and anybody else in this country because we are eating up resources that could be used, put to better
use and are now just evaporated because that wealth no longer exists. I find wind to be one of the, and from what I have seen and
heard from various sources, one of the most inefficient ways of producing electricity per cost and not to mention the fact that there
are environmental costs to it as well, the thousands of birds that
get killed. I am not necessarily a bird man here but I can just tell
you that there are many more birds that are killed by windmills
than there are by fracking from what I understand.
And by the way, wind energy is not anything new. My family
came from a small farm in North Dakota and I used to go up there
and work in the farm in the summertime, sometimes the wintertime. They had windmills back then. In fact, about 100 years ago,
windmills were thought to be the potential use for electricity, especially on farms and places like that, but they decided not to go that
direction because it was cheaper and it was a waste of resources
not to go with the cheaper method of producing electricity, and if
you dont go with the cheaper method, you are evaporating wealth,
which could be put to use in improving peoples standard of living.
And let us also note, the idea that we have not been financing
green energy research as compared to what we are doing with oil
and gas is just incredible. I mean, hundreds of times more money
has been spent on green energy research than in oil and gas, and
that is documented here.
And one other thing. I think the oil industry and the gas industry, one of the most vilified industries that have done so much good
for our country. Having come from a family in North Dakota, I realize what our cities must have smelled like when we were relying
on horses for our transportation system, and I will tell you that a
hundred years ago, one of the biggest problems was horse manure,
and the smell and the stench and the health-related things, and
the oil industry saved us from all of that, and kids arent even
taught that now. They just think that it was hunky-dory back in
those days.
74
One thing that I probably have disagreed with the industry
about is about this whole research thing that we are talking about
today. If we are putting money into research, which is what we are
talking about, and we are talking about how fracking became, you
know, a viable source, and there are certain technologies that were
developed and certain government involvement in that. What is the
American taxpayer getting out of that? Are we going to, as far as
I am concerned, if we invest in the development technology for your
industry, and that technology reaps a big reward because we are
producing all this energy now and making billions of dollars doing
it, shouldnt the taxpayers be the owners of that technology if we
are investing in it, and how much have we gotten back from our
investment in research, for example, in fracking and other things?
Besides the fact the public is benefiting, there is no doubt about
that, but we are talking about in the other industry and people
input money into research and development, develop new technologies, they have the patent rights and they have the property
rights to that utilization and they make money on it. Now,
shouldnt the taxpayers make money for investing and developing
your technology? Anybody can answer that. That is fine with me.
Dr. HILL. I guess the government could do that if they chose to,
in other words, Department of Energy-funded research, the Department of Energy could own the intellectual property. In general, the
way it has always been is that this type of research is done for the
general benefit of the public and so that knowledge that is created
is share with everyone.
Mr. ROHRABACHER. Mr. Chairman, just for the record and this
hearing, that this is one Congressman that would insist that if we
are going to invest taxpayer money and whether it is the oil industry or any other industry, that developing technology for them to
make a profit, the taxpayers should have an ownership right of
some kind on the technology that is being developed, and that is
just for the record. Thank you very much.
Mr. MARTINEAU. Let me answer one thing there. If you think
about the economy, the natural gas prices here in the United
States, they are benefiting because we have so much natural gas
now that gas prices are down so low and they are benefiting indirectly. If they want to move to Europe, they sure can and pay $11
in MCF over there as opposed to $3.
Mr. ROHRABACHER. You know any time you do something right
in a free market economy, it means somebody is going to make
some more money, right? So it is not just oil and gas, it is anybody,
if we were paying the research and development costs for any other
industry and then they were profiting from it, that would be different if that industry was using their own money and developing
their own technology. They would actually own the rights to that
particular technology and they would lease it out to other people
and make money from it. Now, if the United States government is
going to do this for your industry or any other industry, I might
add, I just think that the taxpayers should own that share of the
technology they are helping to develop and should go into the coffers of the taxpayer.
Chairman HARRIS. Again, I want to thank the gentleman from
California, and the gentleman, the new gentleman on the Com-
75
mittee has been very patient waiting. It is my pleasure to recognize
Mr. Curson for five minutes for questioning.
Mr. CURSON. Thank you, and being the newest member, I am
probably the least knowledgeable about this issue, but I have studied the history of this Committee and these hearings, and first I
want to agree with the previous speaker that I am glad that our
automobiles arent powered by horse manure, coming from the industry.
But in this particular issue, I know the question that the citizens
of my district will ask is, we have got an industry that the government has participated in R&D. This is a for-profit industry. They
provide the oil industry very generous tax rates and incentives.
The three largest companies, oil companies in America, in 2011
made $80 billion in profits while the rest of the economy was struggling out of the worst recession that we have had in many, many
years. Why would the government pay for R&D to create more
profit for a profit company when these companies arent making
nickels and dimes, they are making huge dollars? I heard clearly
that many of the smaller oil companies that dont make these type
of profits are the ones that are the actual benefactors. Well, there
is other ways for those companies to take advantage of this rate.
I believe thatI would like to have an answer on why in the big
picture with companies making this kind of profit should the government be rolling out taxpayer dollars to do your R&D, particularly these arent new technologies. This unconventional resources
have been around for years and the oil companies have decided not
to pursue them because they werent profitable in the end. So if
now new technologies are making it more clear that they can be
profitable, you would think that would be the responsibility of the
oil companies to pursue it, and in previous hearings on this very
subject when you get a member of the U.S. Chamber that says I
dont think you will find anybody in the industry that is saying we
need more money from the federal government. I believe that is
the same thing the citizens of my district would say.
So if there is a reasonable answer to that, I would like to hear
that.
Dr. HILL. I would like to point out that again, as I said in my
testimony, the majority of research funding of this type that goes
to the Department of Energy in general, it is funding university research. Is it not going to Exxon Mobil. It is not going to these very
profitable oil companies. It is being spent in universities, and this
is how we were able to train the engineers that this country desperately needs, and so I would encourage you to think of it that
way. Dont think of this as not money flowing directly to the industry, it is helping develop technology that anyone in the country is
welcome to use but it is really being spent in support of education.
Mr. MARTINEAU. And that education goes to people like Apple.
You notice where Apple is on their profits compared to Exxon? You
need to look at that. It is four times higher than what Exxon is,
and the engineering that he was just talking about from those students is what helped. Will you give up your phone? Will you give
up your computer? Will you give up the plastic that you use every
day in these water bottles? It all comes from the research done
76
originally by the oil and gas industry and utilized by other technologies like Apple.
Chairman HALL. Will the gentleman yield?
Mr. CURSON. I yield the rest of my time.
Chairman HALL. What percentage of the little independents that
drill and hit to those who drill and miss?
Mr. MARTINEAU. You dont want to know the number of dry holes
I have drilled in my lifetime.
Chairman HALL. I think that answers my question.
Mr. MARTINEAU. And you know, it kind of goes back, speaking
of dry holes made me think about when we talk about intangible
drilling deductions, and the reason that bill was put in place back
in 1913 was because at that time if you drilled a bunch of dry holes
or non-commercial wells, you were out of business, and if you didnt
continue having some sort of resources, so that tax credit for intangible drilling was passed in 1913, 100 years ago, and because of
that being able to continue if you drill dry holes and non-commercial wells, Mr. Hall, is what has kept our industry alive, and to be
able to say you want to take away intangible drilling costs, you will
put so many companies out of business, it is unbelievable because
not everybody drills a producer, let me tell you. There can be noncommercial wells, and people forget about those, but you havent
got your money back. And it is not like making a washing machine
or an automobile, you know. It comes out every day. You come and
drill with me, you might not make a well every day.
Chairman HARRIS. Thank you very much, and I want to thank
all the witnesses for your valuable testimony and to the members
for their questions. The members of the Subcommittee may have
additional questions for the witnesses, and we ask you to respond
to those in writing.
Mr. ROHRABACHER. Mr. Chairman?
Chairman HARRIS. I am sorry. I yield to the gentleman from
California.
Mr. ROHRABACHER. I would like unanimous consent for one
minute.
Chairman HARRIS. Without objection.
Mr. ROHRABACHER. I would just like to thank Mr. Miller for the
job that he has done with us. It has been a lot of fun kibitzing with
you on various issues, and he is a very intelligent member and a
very hardworking member of this Committee, and sometimes we
have had disagreements, obviously, but the fact is, is that he is a
very respected person here and we will miss him and wish him
well in the years ahead. Thank you for the good job that you have
done.
Mr. MILLER. Thank you, Mr. Rohrabacher. I am not aware of any
instance in which either one of us has convinced the other of anything, but thank you.
Chairman HARRIS. I want to thank the gentleman from California and echo the gentlemans comments. It has been a pleasure
working with the ranking member. And, you know, in the end, we
all realize that we want what is best for the country and what is
best for Americans, and do our little bit here on the Energy and
Environment Subcommittee of the Science Committee toward that
77
end. I want to thank him for his service to the Congress and to his
district.
Anyway, again, we will ask you to respond to any questions in
writing that come from Committee members. The record will remain open for two weeks for additional comments from members.
The witnesses are excused and the hearing is adjourned.
[Whereupon, at 10:53 a.m., the Subcommittee was adjourned.]
Appendix I
ANSWERS
TO
POST-HEARING QUESTIONS
(79)
80
ANSWERS
TO
POST-HEARING QUESTIONS
Responses by Dr. Anthony Cugini

Hearing Questions for the Record
The Honorable Andy Harris
Dr. Anthony Cugini
1. What recommendations do you have to resurrect and develop a Department of Energy oil
shale research and development program? What are key items and considerations to
guide oil shale research activities?
2. Please describe the types of activities you anticipate DOE supporting as part of its
contribution to the interagency shale gas study effort. Can you ensure the committee that
activities focused on issues such as safety and the enviromnent are designed not to find
problems or excuses to regulate but rather are focused on developing technological
solutions to enable increased production? Beyond enviromnental issues, what other
govemmentally-appropriate research and development activities can be undertaken to
advance expanded development of domestic unconventional resources?
81
Responses by Mr. David Martineau

Mr. David Martineau
1. What sort of impact have shale plays, such as the Barnett and Eagle Ford, had on the
local economy and unemployment rate? In addition to direct benefits, what increased
professional demands in related economic sectors is Texas experiencing? What are some
of the multiplier effects?
2. As you are aware, technological development in unconventional energy productions is
providing extensive economic benefits in a time of sorely needed economic stimulation.
Can you speak to the impact of energy development on average consumers? In addition
to employment benefits, what other sorts of positive effects do people experience on a
day to day basis?
3. Mr. Martineau, a recent report by Citigroup declared that "North America is the new Middle
East. The only thing that can stop it is politics ... " Can you describe potential hurdles politics
could pose to the timely, safe, and economic recovery of our oil and gas resources?
4. The Wall Street Journal's CEO Council recently ranked the most important U.S. policy
issues and concluded that promotion of shale oil and gas to be among the top five-right
alongside deficit reduction, taxes, and immigration. This speaks volumes about the
magnitude and importance of the broader spillover effects of the revolution in
unconventional oil and gas development. Can you speak to the broader importance
increased energy production can have? For example, what effects are cheap and abundant
natural gas supplies having on the manufacturing and chemical industries?
82
Responses by Dr. Daniel Hill

Dr. Daniel Hill
1. How can technology advances in water reuse and recycling improve operation efficiency
and potentially mitigate stress on local water resources? Can you speak to what type of
R&D needs to be conducted in order to enable treatment and re-use of fracking water for
other purposes, such as agricultural?
2. Please identify some challenges associated with produced water management and the
different nature of those challenges across different shale plays? How are recycling
techniques and technologies different across shale plays and unconventional oil and gas
resource types?
3. What are some of the potential alternatives to fracking with fresh water, such as nonpotable or brackish water? Additionally, please comment on waterless options such as
propane gel or compressed air, and discuss how University research and development
might enable these sorts of options?
4. Can you comment on how the Produced Water Utilization research and development
activities contained in H.R. 6603 address major challenges related to minimizing
potential environmental impacts of shale operations?
83
Responses by Mr. Michael Hagood
RESPONSES TO HOUSE OF REPRESENTATIVES COMMITTEE ON SCIENCE, SPACE, AND TECHNOLOGY
RESPONDENT: Michael Hagood, Idaho National Laboratory

Question #1: What is the current state of global activity on oil shale research and production? Is there
a risk of the U.S. falling behind to foreign countries and companies that are also pursuing
development of oil shale?
Response: The world's oil shale deposits are located in more than 30 countries with more than 60%
located in the USA (Allix et ai, 2011; Knauss et ai, 2010). Given historical precedents in evaluating oil and
gas deposits, additional oil shale deposits will likely be discovered in the future. Most of the world's
commercial oil shale development operations are currently focused on surface or subsurface mining
approaches accompanied by less sophisticated surface shale retort processes.
Oil shale research and development (R&D) is primarily being applied to in situ development processes,
i.e., for those deposits that are sufficiently deep and not economical to mine. Much ofthis R&D is
funded by U.S. and international industry, primarily associated with Western U.S. oil shale development.
The import of this particular R&D focus is significant given that some of the greater concentrations of oil
shale resources are found at depth. Summary profiles of oil shale technology and R&D can be found in
various reports (U.S. DOE 2007, 2010, 2011).
Of particular relevance to oil shale research, the Albertan government and industry have
invested
heavily in in situ processing R&D associated with developing Canadian oil sands, primarily located in
Alberta. Although, oil sands differ compositionally from Western
u.s. oil shale, oil sands research has
spawned significant innovation, including some benefitting U.S. oil shale research. As a result of this
investment, Canada maintains both a n operational and R&D leadership position relative to in situ
processing of unconventional oil resources.
Current R&D leadership derived from a combination of Canadian oil sands work, Western U.s. oil shale
technology demonstrations, and hydraulic fracturing technology will have a revolutionary impact on
unconventional oil development, worldwide.
However, if incentives are insufficient to advance oil shale
research domestically, international leadership opportunities may pass by U.S. stakeholders. Informally,
there are indications that this may be occurring already, with certain major oil companies refocusing
their situ processing/extraction R&D from
u.s. oil shales to international locations.
84
References
Allix, Pierre, 2011: Coaxing Oil from Shale Oilfield Review, Winter 2010/2011. Allix, Pierre; Burnham,
Alan K. (2010-12-01). "Coaxing Oil from Shale" (PDF). Oilfield Review (Schlumberger) 22 (4): 6.
httD:UWWw.slb.com/~/media/Files/resources/oilfield review/ors10/win10/coaxing.ashx.
Retrieved 2012-04-18.
Crawford, P.M., C. Dean, J. Stone, J. Killen, 2012. "Assessment of Plans and Progress on US Bureau of
Land Management Oil Shale RD&D Leases in the United States."
http://www.unconventionalfuels.orq!otherreports.html.
Knaus, E, Killen J., Bigiarbigi K, and Crawford P: "An Overview of Oil Shale Resources," in Ogunsola 01,
Hartsetin AM and Ogunsola 0 (eds): Oil Shale: A Solution to the Liquid Fuel Dilemma.
Washington, DC: American Chemical Society, ACS Symposium Series 1032 (2010): 3-20
U.S. DOE Office of Petroleum Reserves, 2007. Task Force Strategy and Program Plan, 2007. "America's
Strategic Unconventional Fuels." Volume I Preparation Strategy, Plan and Recommendations,
Volume 11- Resource-Specific and Cross-cut Plans, Volume 111- Resource and Technology
Profiles."
U.S. DOE Office of Petroleum Reserves, September 2010. "Oil Shale Research in the United States:
Profiles of Oil Shale Research and Development Activities in Universities, National laboratories,
and Public Agencies." U.S. Department of Energy Office of Reserve Lands Management. Second
Edition,
U.S. Department of Energy Office of Petroleum Reserves Office of Reserve Lands Management, Fourth
Edition, September 2011. "Secure Fuels from Domestic Resources: The Continuing Evolution of
America's Oil Shale and Tar Sands Industries - Profiles of Companies Engaged in Domestic Oil
Shale and Tar Sands Resource and Technology Development: 5th Edition."
85
Question #2: What are the potential parallels between oil sands and oil shale in terms of
development challenges and related Research and Development (R&D) needs? You noted in your
testimony that Canadian oil sands production, which is currently at almost two million barrels of oil
per day, was really enabled by strategic and targeted R&D supported by the Canadian government.
Can you describe some of the R&D that was undertaken to make oil sands production a reality, and
how that might serve as a model for U.S. activity on oil shale?
Relative to Canadian oil sands development, there is an estimated proven reserve of 169 billion barrels,
which places Canada third in world oil reserves. Oil sands production reached ~1.6 million barrels per
day in 2011 and is projected to reach five million barrels per day by 2030 (CAPP, 2012). Officially
establishing these reserves and the current (and future) production rates have been built strongly on
technology R&D investments.
There are a number of parallels between oil sands and oil shale development pertinent to R&D needs.
Both resources can be extracted by mining or in situ processes, depending on the proximity of the
resource to the surface. Unlocking the greater portions of these deposits (80% of oil sands reserves) will
occur at depth using in situ processes, including potentially hydraulic fracturing techniques, horizontal
drilling, heating, solvents and/or other processes. In addition, development of both resource sets
requires management of process C02, water, as well as addressing other environmental concerns.
In 1974, the Alberta government formed the Alberta Oil Sands Technology and Research Authority
(AOSTRA) for promotion of the development of new technologies for oil sands and heavy oil production
with a main target on finding technologies for that part of the resource that cannot be recovered using
surface mining technologies. The Alberta government invested roughly $800 Million of government
research funding over a period from 1975-1995, while the private sector has invested over $100 Billion
in the Alberta oil sands since the Government of Alberta's original commitment. In March 2012 the
Alberta government confirmed commitment of $150 million annually to AOSTRA 2 over an expected 20year life of the new project with the intent to further development of the oil sands.
In 1984, AOSTRA initiated the Underground Test Facility as an in situ steam assisted gravity drainage
(SAG D) bitumen recovery facility. AOSTRA also supported research at Canadian universities and research
institutions by providing grants to inventors, funding the operation of a technical information system,
promoting international co-operation in oil sands development, and providing scholarships and
fellowships for educational assistance.
This foundational "first phase of R&D" is now leading to further developments, including the next
generation of "in situ" extraction methods, decreasing energy intenSity and the amount of natural gas
deployed for steam generation, reducing water usage and reducing C02 emissions, landscape, etc.
Reference
Canadian Association of Petroleum Producers (CAPP), 2012: Crude Oil: Forecast, Markets & Pipelines.
86
Question 113: What recommendations-do you have to resurrect and develop a Department of Energy
oil shale research and development program? What are the key items and considerations to guide oil
shale research activities?
The U.S. Department of Energy and .its laboratories are well qualified to provide leadership to deliver a
focused, solution oriented, R&D program to help address key challenges in realizing a competitive U.S.
oil shale industry. DOE is a technical integrator that can bring together needed assets and expertise from
both within and outside DOE, including universities and industry, to provide a high-quality R&D program,
and as well, act as a needed honest broker of technical information. It is critical to recognize that any
role that DOE plays, here, should be complementary (not duplicative) to industry pursuits. The following
are selected recommendations and guidance for resurrecting and developing a DOE oil shale research
and development (R&D) program;
Build off of existing work. The U.S. DOE Office of Fossil Energy has conducted
extensive work in
assessing and evaluating the development of a potential oil shale industry, including identifying
technologies and R&D efforts relevant to establishing a DOE oil shale R&D program. The 2007
Task Force Report to Congress on Strategic Unconventional Fuels has details on needed R&D for
Oil Shale. This would be a very good place to identify key items for consideration in resurrecting
a U.S. Oil Shale Research Program.
Establish a U.S. Western oil shale regional perspective and presence. A DOE oil shale R&D
program should be focused primarily around the immense oil shale resources located within the
Western United States, i.e., in Colorado, Wyoming, Utah. Along with this, a more regional
presence by DOE, engaging with regional stakeholders, should be encouraged.
Develop a solutions oriented R&D strategy. A well planned oil shale R&D strategy should be
developed which is driven by the goal of establishing a long-term sustainable and
environmentally responsible Western oil shale industry. As an example, such a strategy should
be built around, in part, production and environmental goals.
Develop an oil shale R&D road map. Once a strategy is developed, with end goals established, it
is recommended to conduct an R&D road mapping exercise to identify various R&D pathways.
Consult Alberta oil sands industry and government expertise. It is recommended to consult with
Alberta oil sands industry, academic and government stakeholders (including provincial and
federal governments) on strategiC planning, research collaborations and designing an R&D
model suitable for
u.s. Western oil shale, as per Energy Policy Act 2005, Section 369 H(4).
Address multiple scales of operations. An oil shale R&D program should focus on challenges that
exist at both a site operations scale and an oil shale industry-wide scale, including addressing
fuel logistics, integrated energy systems approaches, and potential cumulative environment
effects.
87
Address near-term and long-term R&D perspectives: The size ofthe Western U.S. oil shale
resource, as well as its potential longevity, ideally requires both near-term and longer-term R&D
approaches, the latter leading to multiple generations of innovation. This setting also broadens
the perspective for considering R&D site demonstration, applied research and basic research
phases.
Promote collaboration across DOE Offices: Given the nature of oil shale development and
trends being witnessed in energy development, there is an opportunity to realize significant
synergy between the various DOE offices. Examples may include the Offices of Nuclear Energy
and Energy Efficiency and Renewable Energy working with the Office of Fossil Energy to propose
more integrated approaches that may lead to greater production efficiencies and lessening of
potential environmental impacts.
Engage diverse stakeholders in planning and implementation. Development of an R&D program

should involve significant stakeholder involvement, including across DOE offices, other federal
agencies (e.g., 001, EPA, 000), academia, universities, private industry and others. In particular,
en!5agement with industry is paramount to reduce research redundancies. In addition, given the
location of Western oil shale, there is a need to ensure regional stakeholder participation.
Further, it is important that such a program is complementary to industry needs (not
duplicative).
Target in situ development R&D. Advancement of higher risk in situ concept R&D is needed to
reach proof-of- concept stage of development (pre-competitive), I.e., addressing energy
intensity, fracturing, heat transfer, materials performance, process monitoring, etc.
Target environmental impact mitigation R&D. R&D is required to both understand existing and
potential future impacts from oil shale development, as well as develop technology that can
help mitigate environmental impacts.
Provide an independent source of technical information. DOE can playa very important role in
providing pedigreed technical information to various stakeholders, including the public, and be
viewed as an "honest independent information broker", including addressing some more of the
contentious environmental and technology topics.
Appendix II
ADDITIONAL MATERIAL
(89)
FOR THE
RECORD
90
LETTER
SUBMITTED BY CHAIRMAN RALPH M. HALL FROM THE AMERICAN

GEOSCIENCES INSTITUTE IN SUPPORT OF H.R. 6603
91
Page 2
'Additional information is available online: AGI's publication "Status of the Geoscience Workforce 2011" [PDF online at
http://www.agiweb.orglworkforce/reports.html] highlights a growing disparity between supply and demand of trained
geoscience professionals. AGl's Pulse of Earth Science [http://www.agiweb.orgleducationlstatusreports/2007/index.html]
surveys the limitations ofinquiry-based Earth science education for grades K-12 in the United States. AGl's Critical Needs
publication [http://www.agiweb.orglgap/criticalneeds/index.html] sets out federal policy directions that would help the U.S.
meet the many challenges of the twenty first century.
The American Geosciences Institute is a nonprofit federation of geoscientific and professional associations that represents
more than 250,000 geologists, geophysicists, and other earth scientists. Founded in 1948, AGI provides information services to
geoscientists, serves as a voice of shared interests in OUf profession, plays a major role in strengthening geoscience education,
and strives to increase public awareness of the vital role the geosciences play in society's use of resources, resilience to natural
hazards, and the health of the enviromnent.
92
THE
NEW
BOOM: SHALE
GAS FUELING AN AMERICAN INDUSTRIAL REVIVAL,

WASHINGTON POST
ARTICLE,
93
"For the foreseeable future, thanks to the recovery of vast U.S. underground gas deposits of
shale, natural gas is likely to remain 50 to 70 percent cheaper in the U.S. than in Europe and
Japan," said a recent report by the Boston Consulting Group.
"That will translate into significantly lower costs for electricity generation, for fuel used to
power industrial plants and for feedstock used across many industrial processes," said Justin
Rose, a BCG principal and co-author of the report.
Manufacturers have plans to invest as much as $80 billion in U.S. chemical, fertilizer, steel,
aluminum, tire and plastics plants, according to Dow Chemical. And the main reason, said
George J. Biltz, Dow Chemical's vice president for energy and climate change, "comes back to
the massive competitive advantage the United States has with natural gas today."
A changing conversation
The shale boom has not just changed corporate plans. It has also altered the way we think and
talk about oil and gas.
For decades, most of the conversation about U.S. oil and natural gas has revolved around the
idea of scarcity, declining output and rising prices. The seminal work by M. King Hubbert - the
Shell geologist who accurately predicted in the 1950s that U.S. oil production would peak in
1971
defined this framework.
Natural gas supplies traditionally have been seen as limited and gas prices have been volatilebuming utilities that bet too heavily on gas-fired power plants in the 1990s.
But past assumptions have been challenged by new technologies - and new uses of old
technology. Years of pioneering work on drilling techniques by an independent oilman, George
Mitchell, paid off. Despite concerns about water pollution risks linked to hydraulic fracturing of
shale, drilling and production have soared.
The United States is rife with these shale plays, some rich in natural gas and others rich in oil.
The United States is still producing less oil than in 1971, and prices are high. But the country is
producing more oil than in any year since 1994, and production is rising.
Meanwhile, natural gas production has jumped to record levels. In 2000, shale gas was 2 percent
of the U.S. natural gas supply; by 2012, it was 37 percent.
Natural gas supplies suddenly look bountiful enough to last a century at current consumption
rates, the National Petroleum Council said in a report last year. Some advocates of natural gas
have called it a "bridge" to a clean-energy future because its greenhouse gas emissions are half
those of coal and because gas plants can start up quickly and pair with wind and solar to provide
a reliable alternative to coal.
Others call it a detour, since it is still a fossil fuel and it is undercutting nuclear, wind and solar
energy as well as coal. "Bridge to clean future or U-tum to dirty past?" said a headline on the
94
blog of the environmental group Earthjustice. The United States has drilled more oil and gas
wells than any other country, and the new wave of supplies has brought a new wave of rigs
dotting the countryside and new crisscrossing pipelines.
For environmentalists, the abundance of shale gas poses a political and environmental dilemma.
As new gas supplies fuel more and more industrial plants, new constituencies will have stakes in
gas production, making it politically harder to impose new regulations. The Environmental
Protection Agency is weighing whether to issue additional federal guidelines on various
disruptive aspects of shale gas drilling, including the disposal of toxic water used to fracture
formations and air pollution from drilling operations. The EPA might also issue rules requiring
drilling techniques that would make contamination of water aquifers less likely.
But one thing is clear: Tumbling natural gas prices have changed every calculation and
assumption about the energy business.
Petrochemical reaction
Perhaps no one benefits more from low natural gas prices than the petrochemical industry, which
relies on natural gas as a feedstock and as a source of power. Natural gas, in tum, produces the
building blocks for other products, including paints, solvents, plastics, packaging, inks, dyes and
lubricants.
And no industry better demonstrates just how much has changed in a short period of time.
Chemical-industry employment slid 17 percent from January 2002 through January 2011,
according to the Bureau of Labor Statistics.
In October 2005, after Hurricane Katrina pounded Louisiana, the price of natural gas had spiked
to $14 per thousand cubic feet. Supplies were scarce even before the storm, and Dow Chemical
had temporarily shut down one of its biggest petrochemical plants.
"We say it unequivocally - the U.S. is in a natural gas crisis," Dow Chemical chief executive
Andrew Liveris said in Senate testimony at the time. "The hurricanes have dramatically
underscored the problem, but they did not cause it." Natural gas prices, once $2 per thousand
cubic feet, had soared sevenfold. Gas accounted for half of Dow's costs, he said.
"We simply cannot compete with the rest of the world at these prices," Liveris added. "We and
others are now investing in China and the Middle East, where energy is much cheaper, to our
incredulity. Our industry will continue to grow. It's simply a question of where we will grow."
Among the deals it made: one with Kuwait and a $20 billion joint venture with Saudi Aramco to
build facilities in Saudi Arabia using cheap gas found along with oil there.
Today, Dow Chemical is drawing up plans to construct a plant in Freeport, Tex., and is restarting
a plant in St. Charles, La. And year-end nationwide chemical-industry employment has edged up
for the first time in a decade, the Bureau of Labor Statistics says.
95
Methanex chief executive Bruce Aitken said natural gas prices made moving operations to
Louisiana attractive.
"The proliferation of shale gas in North America has resulted in a structurally low natural gas
price environment, which underpins the very attractive economics for this project," he told
investors in a July 26 conference call.
He said moving the methanol plant from Chile to Louisiana will payoff in less than four years if
gas prices stay around $4 per thousand cubic feet. He said the company was considering moving
a second plant from Chile to Geismar, La.
CF Industries was also lured by the price and proximity of natural gas in Ascension Parish. Gas
makes up about 70 percent of manufacturing costs at its ammonia and urea units. The company
said the site is served by five pipelines at prices set at the nearby Henry Hub, which is the
nationwide benchmark for spot gas prices.
Foreign companies are also eyeing U.S. natural gas.
In September, a large Egyptian construction company armounced that it would build a new
nitrogen fertilizer production plant in southeast Iowa to supply customers in the U.S. Com Belt.
Cairo-based Orascom Construction Industries, one of the world's largest fertilizer makers, said
the $1.4 billion plant would be "the first world-scale, natural gas-based fertilizer plant built in the
United States in nearly 25 years" and would reduce U.S. dependence on imported fertilizers.
After years oflosing manufacturing jobs, most American communities are vying to lure
industries.
Orascom chose Wever, Iowa, over Illinois because part of its investment will be funded by a taxexempt bond. The Iowa Economic Development Authority approved an incentive package that is
expected to provide tax relief "in the order of $1 00 million," the company said.
Royal Dutch Shell has unveiled plans for a $2 billion petrochemical plant northwest of
Pittsburgh, where it can use natural gas supplies from the state's enormous Marcellus shale
formation. It chose Pennsylvania despite being wooed by Ohio and West Virginia.
The broader effect
The economic growth from natural gas abundance extends to companies providing supplies to
the drilling boom.
On Oct. 1, Honeywell armounced that it paid $525 million for a 70 percent stake in Thomas
Russell, a privately held provider of technology and equipment for natural gas processing and
treatment. With the acquisition, Honeywell will offer technologies and products that allow
producers of shale and conventional natural gas to remove contaminants from natural gas and
recover high-value natural gas liquids used for petrochemicals and fuel.
96
Another example: U.S. Steel. The company is churning out new pipe for natural gas drilling rigs,
wells and pipelines. And as a big consumer of power, it is paying less for fuel.
Surma, U.S. Steel's chief executive, said in a speech recently that the company used 100 billion
cubic feet of natural gas in 2011, "so just a few dollars' difference in the price .0.0. allows us to
realize important and significant cost savings." For every dollar change in the price of a thousand
cubic feet, the company saves $100 million.
Surma said the company is also improving its North American blast furnaces to allow for
increased injection of natural gas to reduce its consumption of coke, a fuel derived from coal.
The reduction could cut blast furnace fuel costs by $15 per ton of hot metal produced - and
U.S. Steel can produce more than 20 million tons of steel a year.
"In addition to these kinds of cost savings opportunities, natural gas should provide North
American steelmakers with another operating advantage over our foreign competitors," Surma
said.
Once some of these basic industries come home, companies further down the value chain could
return, too.
"If you make plastics in the United States, there are a bunch of things produced in China that
might tip back to being produced in the U.S.," said Harold L. Sirkin, a senior partner at the
Boston Consulting Group.
"You could think about toys," he said. "We talked to a few companies thinking, 'Does this mean
I can re-shore some toy production to the U.S.?' The energy cost in plastic toys is reasonably
high. And the labor content is relatively low because we're talking about automated injection
molding facilities."
Chinese exporting factories could be vulnerable, especially given the risks of intellectual
property theft, transportation costs and long supply chains.
"All of a sudden, the equations start changing about where you produce things," Sirkin said.
"Even in industries where the cost structure includes only 1 or 2 percent electricity, that could
make the difference."
97
OIL
AND
NATURAL GAS GENERATE EMPLOYMENT AND TAX REVENUE,

SUBMITTED BY MR. DAVID MARTINEAU

House Hearing, 112TH Congress - Tapping America's Energy Potential Through Research and Development

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House Hearing, 112TH Congress - Tapping America's Energy Potential Through Research and Development

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TAPPING AMERICAS ENERGY POTENTIAL

THROUGH RESEARCH AND DEVELOPMENT

SUBCOMMITTEE ON ENERGY AND

COMMITTEE ON SCIENCE, SPACE, AND

FRIDAY, NOVEMBER 30, 2012

Serial No. 112108

U.S. GOVERNMENT PRINTING OFFICE

For sale by the Superintendent of Documents, U.S. Government Printing Office

COMMITTEE ON SCIENCE, SPACE, AND TECHNOLOGY

HON. ANDY HARRIS, Maryland, Chair

Witness List .............................................................................................................

Appendix I: Answers to Post-Hearing Questions

Appendix II: Additional Material for the Record

TAPPING AMERICAS ENERGY POTENTIAL

EDDIE BERNICE JOHNSON, TEXAS

U.S. HOUSE OF REPRESENTATIVES

COMMITTEE ON SCIENCE, SPACE, AND TECHNOLOGY

Subcommittee on Energy & Environment

Tapping America's Energy Potential Through Research and Development

Friday, November 30, 2012

u.s. HOUSE OF REPRESENTATIVES

Dr. Anthony Cugini, Director, National Energy Technology Laboratory, Department of

u.s. to Leapfrog Saudis

Saudi 011 output thooks to

...whlle Its oil demand Is expected

U.S. oil demand VS. production,

In millions barrels a day

'11 '15 '20 f25

Department of Energy Unconventional Oil and Gas Programs

H.R. 5325, the "Energy

Arun Majumdar, Acting Under Secretary of Encrgy

David J. Hayes, Deputy Secret~

Multi-Agency Collaboration on Unconventional Oil and Gas Research

Core reseaa;h competencies'

Con: research competencies-

Hydrology and geology

The three Agencies will take the following steps:

Appendix: Agency Roles and Core Competencies

Department of the Interior:

Environmental Protection Agency:

SUBCOMMITTEE CHAIRMAN ANDY HARRIS

COMMITTEE CHAIRMAN RALPH M. HALL

Chairman HARRIS. Without objection.

SUBCOMMITTEE RANKING MEMBER BRAD MILLER

Domestic Unconventional Oil and Natural Gas Resources

recoverable at a price of$85 a barrel and $40 metric ton of C02.

ETA, Annual Energy Outlook 2012, Table 16, p.58 http://www.eia.gov/forecasts/aeo/pdfI0383(2012).pdf

Mr. MARTINEAU. Thank you very much. Good morning, Mr.

Energy & Environment Subcommittee

Good morning Mr. Chairman and members. My name is David Martineau,

I currently have the pleasure of serving as the Chairman of the Board of

Energy & Environment Subcommittee

1) Tax provisions like Intangible Drilling Cost deductions (IDC's) and

Energy & Environment Subcommittee

In 1976 - the U.S. Department of Energy initiated the Eastern Gas

In 1982 - the federal government began funding the research efforts of

In 1991 - George P. Mitchell, with financial help from the Department

In 2005 - Energy Policy Act - is a research program with the Research

Energy & Environment Subcommittee

Energy & Environment Subcommittee

Successful research will increase the efficiency of the process, significantly

This area of research, the optics of which do not indicate direct

According to data collected by the Texas Water Development Board, the